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Strategy always looks easier in a business
school case study than it does in real life
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because in real life, you don't actually know
what happens at the end.
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I've had portfolio companies of ours sort of
had somebody sneak up on them and eat a part of
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their lunch and vice versa.
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So I think this is one of the challenges in
dynamic tech markets is you don't always know
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what new feature or what new thing is really
gonna matter at the end.
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It's the week of April 20.
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Welcome to the Learning Corner, a Precursor
Ventures podcast.
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Welcome to the Learning Corner by Precursor.
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I'm Mia Farnam, and I'm joined by RGP and
managing partner Charles Hudson, where we will
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be talking through the articles and Goodreads
that caught our team's attention over the past
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week.
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Our first Goodread this week is a LinkedIn post
from Manny Medina, cofounder of Outreach, and
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his reflection on a lesson he wishes he had
fully embraced from the start that the job of a
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VC backed founder is to win, and winning means
actively trying to kill your competition.
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Early on at Outreach, Manny had no choice but
to outmaneuver rivals who had raised
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dramatically more capital, and it worked.
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But over time, he says he was talked into going
soft by conventional wisdom like focus on your
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own race, and there will be many winners.
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Advice he now calls out as fundamentally
misaligned with what founders owe their
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investors.
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He points to real examples of companies that
won by acquiring or suffocating competitors,
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DiscoverOrg, OneTrust, and Salesforce versus
his own company that held back and watched
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billion dollar businesses like Apollo and Gong
fill the gaps they left open.
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The post mentions of observation at the end.
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Uber's market cap is 30 x that of Lyft.
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And while everyone can talk about Uber's
leader, most people can't even name who ran
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Lyft.
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Manny's framing here is really clear that
killing competition is your job as a VC backed
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founder.
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We've, the podcast and then internally on our
team Yeah.
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Also talked about the risks of having your head
too much on a swivel.
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So it's difficult to actually focus on your
customers when you're so locked in on people
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building around you.
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Wanted to pause for your reflections here,
Charles.
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Yeah.
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The first time I read it, I was like, oh,
there's something in here that resonates, but
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I'm not sure I would describe it in exactly the
same way that Manny did.
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I started thinking about the companies he
mentioned, Uber and Salesforce in particular.
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And I think it wasn't even as much about
killing the competition as it was having this
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really big holistic view of what you're trying
to do.
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And whenever I talked to my friends who worked
at Uber in this ascendant days, they had this
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like world domination idea that we're gonna be
in a lot of businesses, and we're gonna compete
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in a lot of geographies.
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And that's what it's gonna take to become the
global leader in transportation, logistics, and
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delivery.
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And I think it was more about the breadth of
the vision required them to win in all of the
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and remember, like, didn't win everywhere.
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They spent a lot of money.
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But I will say Uber competed in every region,
in every geo, in every category that they went
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into.
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And if I think about Salesforce, I think my
sense has always been that's a company that
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wanted to be one of the, if not the most
important software vendor to their customers.
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And to do that, you have to provide more of the
things that your customers need.
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And again, not every acquisition that
Salesforce has made has worked out.
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But Salesforce has always been, I think,
aggressive in trying to make sure that if one
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of our customers has a business problem,
whether it's customer service, whether it's
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CRM, we should have a solution for them.
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And I think it to me, it's more about two
things.
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What does it mean to kind of dominate your
category?
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Well, sometimes dominating your category does
mean you have to snuff out competition early to
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not give them room.
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And sometimes it means figuring out, like,
well, how much space can we really take up in
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our customers' lives?
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And how do I make sure that we're executing on
a strategy that maximizes that?
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And to be fair to many, I don't think a lot of
investors thought that companies like Gong and
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Apollo I met the Apollo team early.
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I was like, this is a really neat feature or a
really neat tool.
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And so I think the the danger is if you try to
kill everything, like, you don't build anything
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on your own.
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You're just being very reactive.
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And it's hard sometimes.
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You know, we have to put this in our team
meeting.
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Strategy always looks easier in a business
school case study than it does in real life
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because in real life, you don't actually know
what happens at the end.
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And so we've been on both ends.
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I've had portfolio companies of ours sort of
had somebody sneak up on them and eat a part of
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their lunch and and vice versa.
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So I think this is one of the challenges in
dynamic tech markets is you don't always know
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what new feature or what new thing is really
gonna matter in the end.
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I wanna talk about the piece that Manny
mentioned earlier about competitors who raise
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far more capital than you did, which seems to
be happening more and more, especially if
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you're building with an AI.
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If that is the space that you're in as a
founder and you see a quasi competitor or a
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direct competitor come out of stealth having
raised three to four x the amount of capital
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that you did, how do you make the decision as a
founder of how much to take that into
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consideration when you're running after the
same customers?
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Or do you really try to just stay focused on
the path that you have already outlined for
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yourself?
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I find that that's Yeah.
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Just something that comes up in meetings with
founders oftentimes when they it's like the
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elephant in the room almost.
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As investors, I've never felt like it's a
helpful thing to bring up of like, oh, did you
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see the 30,000,000 like, it's just obviously,
they've seen it.
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I don't unless I have something really valuable
to share about how they can use that to their
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advantage, I just don't think it's a good use
of time.
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But I don't know sometimes if founders know
where to prioritize after seeing stuff like
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that.
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I just talked to a founder in our portfolio
who's selling her company.
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And she said, look, a bunch of my competitors
have raised a ton of money.
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None of their businesses are really working,
but a, they've sort of sucked the fundraising
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oxygen out of the room.
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And b, like, they're engaging in business
practices that, like, don't make any sense from
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a pricing go to market standpoint.
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And she's just like, I don't know if any of
them will win, and I'm not gonna pick on
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specific companies.
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But I can think of a few categories where VCs
piled in, funded a bunch of other companies,
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and then the VCs moved on, but those founders
were stuck with those businesses.
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They raised $50.60, $70,000,000 to dominate a
category and turned out the category either was
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harder to dominate or was less interesting than
originally thought, and they're still running
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those businesses.
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And I'm like, well, to what end?
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My sense is when people raise lots of money, it
tends to create some fairly predictable
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distortions in your category.
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They tend to spend a lot more money on GTM, so
they will flood the zone from a marketing
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standpoint.
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The smart companies will spend that money in
ways that actually create value.
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A lot of it's wasted.
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They will look around at like, hey.
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We have product and technology gaps.
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We should maybe go acquire companies that can
help us solve those things, and cash makes that
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easier.
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I think the third thing is I tend to find the
people who are able to raise those routes are
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naturally more aggressive Mhmm.
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Or can convince VCs that their vision for the
category or the product is more expansive.
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So it's kind of like a what's first?
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Is it the expansive vision that comes first, or
is it the money that enables expansive vision?
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I'm pretty sure it's the expansive vision that
comes first.
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And then once you've got the $30,000,000, you
probably told the investors, hey, we're gonna
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flood the zone with marketing.
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We're gonna go acquire some smaller companies,
and we're gonna patch this thing together, and
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we're gonna build the brand.
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And yes, is it a Frankenstein company?
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Sure.
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All those all those things apply.
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But I think for the people who are wired that
way, that playbook's never been easier to
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execute than it is right now.
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The one thing that I do want founders to
prioritize, or they just have to if they're
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going out to raise money and they have
competitors who have raised much more capital
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than they have in the market, is like you have
to be able to speak to the story as to what
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your competitors have done that you're not
going to be doing that's going to be more
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effective.
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Because to your point, I find that's actually
the likely scenario.
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There's been way more money that's flooded into
a specific industry that leaves scar tissue
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with investors.
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So it's not like, oh, these wonderful
experiences make me more excited to jump in.
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I've seen that a lot with health care.
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If we've done this back in 2021, we're all set.
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So I would say for founders who see competitors
building, if you were choosing to wanna stay
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your path, just know that you do have to speak
to the folks who are in your own space and how
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you're gonna be differentiated and maybe what
they've left open as gaps that you can take
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over.
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You have to be educated about that space for
sure.
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And and I think you have to be realistic.
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I sometimes Yeah.
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Hear founders tell me a story and I'm like, I
understand why you want that to true.
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That, oh, you know, the product sucks and this
and that.
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But is it true?
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And I think it takes a lot of intellectual
honesty to be able to say that, like, yeah,
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it's frustrating when your when your competitor
who you think has an inferior product raises a
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lot of money.
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The dismissal can't be, well, their product
sucks.
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Well, they have a lot of money.
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They're probably doing something.
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So let's at least be honest about what are the
things that they're doing that we cannot do?
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Yeah.
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Also, the product could suck, but does that
even matter?
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Like, if I I would say for most b to b SaaS
features and products that are sold at Fortune
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500 companies, they're not good products.
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But they have multi million dollar deals under
the belt, which means that it stinks.
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But people are happy to use this, like, half
baked product because it's what they've used
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before.
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So being realistic is such a throughput here.
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Our next Goodread is also a LinkedIn post from
Samir Kaji, CEO of Allocate and host of Venture
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Unlocked, sharing what he calls his fundamental
truths in VC right now.
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It's a really tight list of observations, but a
few stood out.
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The barbell between large and small VC firms is
wider than it ever has been, and LPs should
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treat them as entirely distinct asset classes.
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Zmir also flags that no portfolio construction
model, whether concentrated or diversified,
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rescues a bad portfolio.
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And that the real variable is whether you are
in great companies to begin with.
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He raises a quiet but growing concern around
ARR reporting, noting that founders are
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increasingly coached to show growth to maintain
valuations, and that is getting dangerous.
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He closes on a note of honest uncertainty about
AI, arguing that the people who sound most
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certain about how it all plays out tend to be
the most financially invested in a particular
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outcome being true.
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Samir says that the barbell between large and
small firms is as wide as it's ever been, and
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they're just genuinely two different asset
classes now.
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As a seed investor, how do you think about
where we sit or maybe, you know, folks who've
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started funds back ten years ago are and
haven't grown their fund sizes out too
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tremendously just to keep that same strategy?
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And has the pressure from both ends changed how
you see the firm operating at all?
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I didn't realize this when you picked out.
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There's like a through line with the last
article too, which is, you know, we talked
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about what do you do when you're a portfolio
company.
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00:10:08,034 --> 00:10:10,595
I think the same question applies to venture
capitalists.
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You know, we've kept our funds small for out of
a mix of strategy, personal preference, a lot
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of things.
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And I tell a lot of I told a of people last
year, it'd be very comforting to think that
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you're allowed to execute whatever strategy you
want, but the market has the vote too.
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00:10:24,589 --> 00:10:28,669
And so I think part of what's happening in
Venture, we've this has been, I think, the
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theme of the last year, is this continued
pulling apart of small and large firms.
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And, you know, as a small fund, you gotta
remember, there's a lot of short term
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incentives for you to to mimic the investment
decisions of big firms.
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I just saw someone else posted a one of these
charts.
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These are the seed funds that have the biggest
follow on uptake rate by the big tier one firm.
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00:10:47,870 --> 00:10:48,509
Like, great.
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00:10:48,509 --> 00:10:50,670
I don't I don't know what I don't know what to
do with that information other than to say,
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like, congratulations.
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00:10:51,470 --> 00:10:54,830
Like, doesn't necessarily mean that those
companies will be more successful or better.
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It is just a data point.
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00:10:56,430 --> 00:10:58,430
So I think about I think about this a lot.
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Yeah.
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I'd like to say I spent most of last year re
underwriting the whole use case of small firms
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00:11:04,345 --> 00:11:05,065
in venture.
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00:11:05,065 --> 00:11:09,065
And I I came away with one big conclusion,
which is on average, to make a broad
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generalization, most of the larger players in
our space, this whole legibility.
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00:11:13,304 --> 00:11:15,519
This is one of those words that Michael, but I
get it.
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00:11:15,519 --> 00:11:19,840
They're looking for legibility as in, like,
founders with backgrounds and working in
220
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categories that are easy to understand and
underwrite for them.
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So people who went to a narrow set of schools,
people with a really specific set of
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backgrounds, maybe they graduated from an
accelerator, know.
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That is not going to be the totality of returns
in venture.
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If it ever becomes 100%, then everybody else
should just go home.
225
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But I think we're far from that world.
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And so I do think that no matter what your
strategy is in venture, you should constantly
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00:11:42,360 --> 00:11:45,959
re underwrite it every twelve to twenty four
months and say, like, is the thing I'm doing
228
00:11:46,120 --> 00:11:49,559
does it still make and I'm I'm I've talked to a
lot of friends who are simultaneously
229
00:11:49,559 --> 00:11:54,199
increasing their fund size and becoming even
more concentrated because they're like, look,
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the only way to make the returns math work is
we need more money to compete for the best
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deals.
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And when we win them, we have to own more of
them.
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And I'm like, that is a strategy that's based
on a set of assumptions about where venture is
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going.
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And if you're right, then that's the right
strategy.
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If not, you're gonna end up with a gigantic
hole.
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So I think strategy making right now for VCs is
no easier than it is for founders.
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And the other thing I will say is that I read
everything Sameer writes.
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I would say a subtle tone shift from him
expressing caution about AI.
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He's been one of the most bullish, positive, I
wouldn't say unabashed, but really positive AI
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voices I know.
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And I think I too have had the same questions
and concerns around ARR reporting and, you
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know, forcing people to grow.
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It's dangerous.
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So Yeah.
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It's really a tough time.
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Do you think that last piece that you mentioned
of making sure you're being cautious around
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reporting, do you think that that's something
that is a call for maybe LPs to carry out a
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little bit more heavily?
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Because I think in our job, we've known this to
be true for the last year and a half.
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I think part of the challenge is the reward to
caution is you maybe don't raise your route.
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00:12:55,975 --> 00:13:00,615
And the question is, like, are companies
fooling VCs or are VCs in on it too?
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I kinda think it's more of the latter.
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You don't have to usually scratch too hard to
figure out, is this ARR number, is it all
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deployed or is some of it contracted?
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As someone once said, they have to pay you
twice before you can call it recurring.
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There there's a lot of things that but the
question is, like, how hard do you wanna look?
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And I I don't think that many VCs I know are
actively being misled.
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I think they're choosing to say, look, there's
a chance that this isn't all recurring.
260
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There's a chance that this is a little bit
funny.
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But the growth is good, like, everybody's got a
little bit of this funny on the books.
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And so as long as we're not investing in fraud,
it's probably okay.
263
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Yeah.
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That that is a position to take.
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I was at a breakfast yesterday, and it was a
mix of, like, LPs and GPs.
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And one person was at a CBC of a large Fortune
500 company.
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I'm not gonna name which one.
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And he mentioned that in the past year alone,
their company signed off for 02/1963 pilots for
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new AI tools.
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Two of them went through the contract.
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It was Adobe and another company that was not
any of the fancy AI companies because I would
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have remembered it.
273
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It was not that.
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00:14:03,425 --> 00:14:08,139
And so that really does also reinforce young
companies that you see that state a lot of
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really exciting ARR numbers.
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You have to really hammer in of, like, how much
of this is pilot?
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00:14:12,940 --> 00:14:13,740
And I asked him too.
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I said, like, how long are the time lengths for
the pilots?
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He said, all range.
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It could be a month.
281
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It could be a year.
282
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They're all different types.
283
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We had them simultaneously running, but only
two of them went through.
284
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Do you think 2026 and maybe even the beginning
of 2027 will illuminate any reckonings between
285
00:14:28,674 --> 00:14:32,195
what's real and what's elaborated, or do you
think we've got still a little bit more to go
286
00:14:32,195 --> 00:14:32,674
here?
287
00:14:32,754 --> 00:14:34,434
I do for a very different reason.
288
00:14:34,434 --> 00:14:36,995
It's a small thing, but a lot of people I don't
notice.
289
00:14:36,995 --> 00:14:40,009
You know, Anthropic took Claude Code out of the
pro plan.
290
00:14:40,009 --> 00:14:41,289
I use Mac, so it's fine.
291
00:14:41,289 --> 00:14:46,809
I do think one thing that's gonna happen is
we're definitely in the $5 get across town in
292
00:14:46,809 --> 00:14:49,289
San Francisco Uber era of tokens.
293
00:14:49,584 --> 00:14:55,264
And I do think as that gap between true cost
and cost of the consumer begins to close, some
294
00:14:55,264 --> 00:14:57,904
things right now that are not worth paying
attention to because they're little
295
00:14:57,904 --> 00:14:58,384
experiments.
296
00:14:58,384 --> 00:14:59,504
People are gonna say, wait a minute.
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00:14:59,504 --> 00:15:00,945
How much are we spending on that thing?
298
00:15:00,945 --> 00:15:02,784
Are we really getting anything out of it?
299
00:15:02,784 --> 00:15:07,190
And I think prices will go up to consumers, to
business consumers, and scrutiny will go up.
300
00:15:07,190 --> 00:15:10,629
I think the other thing is many of these things
have been running long enough that people ought
301
00:15:10,629 --> 00:15:12,309
to be seeing some ROI from them.
302
00:15:12,309 --> 00:15:16,389
And so I think there's gonna be a combination
of factors that are gonna make it harder to
303
00:15:16,389 --> 00:15:21,485
sell the AI dream without some reality in the
back half of this year and all of next year.
304
00:15:21,485 --> 00:15:21,884
Yeah.
305
00:15:21,884 --> 00:15:26,764
I assume that founders will have to be able to
show the ROI much quicker than you would be
306
00:15:26,764 --> 00:15:31,620
able to kind of like show a little AI dance
before and by like six or seven months to just
307
00:15:31,620 --> 00:15:31,779
kind
308
00:15:31,779 --> 00:15:32,019
of Yeah.
309
00:15:32,100 --> 00:15:33,220
Win people over.
310
00:15:33,220 --> 00:15:38,899
Our last piece this week is a post on X from
Tuesday night from SpaceX announcing a new
311
00:15:38,899 --> 00:15:42,580
partnership with Cursor to build what they're
calling the world's most useful models for
312
00:15:42,580 --> 00:15:43,940
coding and knowledge work.
313
00:15:44,225 --> 00:15:49,184
Cursor brings leading product and distribution
to expert software engineers and SpaceX brings
314
00:15:49,184 --> 00:15:53,345
Colossus, their million h 100 equivalent
training supercomputer to the table.
315
00:15:53,345 --> 00:15:57,504
What makes this one really worth discussing is
the deal structure attached to it that we
316
00:15:57,504 --> 00:15:59,985
really only know service level on of of what's
been shared.
317
00:16:00,200 --> 00:16:04,440
SpaceX has been granted the right to acquire
Cursor later this year at a $60,000,000,000
318
00:16:04,440 --> 00:16:08,759
valuation or alternatively pay $10,000,000,000
for the work produced through the
319
00:16:08,759 --> 00:16:09,559
collaboration.
320
00:16:09,559 --> 00:16:15,960
For context, Cursor only recently crossed
500,000,000 in ARR, making a $60,000,000,000
321
00:16:15,485 --> 00:16:20,685
price a jaw dropping multiple and a signal of
just how aggressively the market is pricing AI
322
00:16:20,685 --> 00:16:22,685
infrastructure and distribution right now.
323
00:16:22,764 --> 00:16:25,644
That deal structure obviously is is what caught
my eye here.
324
00:16:25,644 --> 00:16:29,805
SpaceX essentially has an option to buy it at
60,000,000,000 or pay 10,000,000,000 for the
325
00:16:29,805 --> 00:16:30,605
output of the partnership.
326
00:16:31,080 --> 00:16:35,800
What does that structure tell you about how
companies are thinking about locking in AI
327
00:16:35,800 --> 00:16:38,680
capability before the window, quote unquote,
closes?
328
00:16:38,680 --> 00:16:43,480
It reminds me of a very convoluted Microsoft
OpenAI deal back in the day where they're gonna
329
00:16:43,480 --> 00:16:44,279
buy some compute.
330
00:16:44,279 --> 00:16:47,945
The person who sent me this right before it got
announced, I was like, oh, wow.
331
00:16:47,945 --> 00:16:48,504
Are you sure?
332
00:16:48,504 --> 00:16:52,105
I but immediately, I was like, are you sure
this is from a reputable source, or were you
333
00:16:52,105 --> 00:16:52,904
spending too much time?
334
00:16:52,904 --> 00:16:53,384
He's like, no.
335
00:16:53,384 --> 00:16:53,545
No.
336
00:16:53,545 --> 00:16:54,665
It's gonna come from SpaceX.
337
00:16:54,665 --> 00:16:56,184
And it it did a couple minutes later.
338
00:16:56,264 --> 00:16:59,545
And I asked him, I said, who's who's saving
who?
339
00:16:59,545 --> 00:17:00,529
And he's like, what do you mean?
340
00:17:00,529 --> 00:17:06,929
I go, is this Cursor helping Grok remain
relevant and get more value out of Colossus?
341
00:17:06,929 --> 00:17:12,769
Or is this Grok helping Cursor remain relevant
by giving them a bunch of compute for their new
342
00:17:12,849 --> 00:17:14,690
for the Kimi based, their their new set of
models?
343
00:17:15,055 --> 00:17:16,974
And he said, could it be both?
344
00:17:16,974 --> 00:17:17,455
I'm like, yeah.
345
00:17:17,455 --> 00:17:19,294
Actually, it could be both.
346
00:17:19,295 --> 00:17:23,375
And so I think there's like a whole another
layer, which is like, if you believe SpaceX
347
00:17:23,375 --> 00:17:29,134
will go public and that the company's valuation
will hold, even in remotely the one to two
348
00:17:29,134 --> 00:17:31,929
trillion dollar range, $10,000,000,000 means
nothing.
349
00:17:31,929 --> 00:17:36,649
I thought about this a was like, it's actually,
for me, fairly interesting that in the end, the
350
00:17:36,649 --> 00:17:41,929
smartest thing to do might have been to sell
Cursor at 30 or 40 or 50 if you had the chance.
351
00:17:41,929 --> 00:17:46,384
In the grand scheme of like how this all plays
out, if it if it trades out at 10, and, you
352
00:17:46,384 --> 00:17:49,984
know, I don't know all of the conditions that
have to be met for that $10,000,000,000 payout
353
00:17:49,984 --> 00:17:50,625
to be made.
354
00:17:50,625 --> 00:17:52,944
These things are it's never that simple.
355
00:17:52,944 --> 00:17:56,625
But it might turn out that a company that we
once thought was worth nothing and then thought
356
00:17:56,625 --> 00:18:01,744
would be the dominant coding player might end
up being a very valuable company, but not
357
00:18:01,319 --> 00:18:03,799
nowhere near as valuable as we had once
thought.
358
00:18:03,799 --> 00:18:06,359
Or it could turn out to be an incredibly
valuable company.
359
00:18:06,359 --> 00:18:09,559
We were all wrong to be skeptical or doubtful
at all.
360
00:18:09,559 --> 00:18:14,835
But a lot of this is contingent on SpaceX's
IPO, and the question I keep coming with, where
361
00:18:14,835 --> 00:18:17,075
do you find that much demand?
362
00:18:17,234 --> 00:18:21,554
Even in Robinhood, like, the irony is a lot of
the big institutions that you would go to for
363
00:18:21,554 --> 00:18:24,355
the IPO, they're already on the books on the
private side.
364
00:18:24,355 --> 00:18:28,960
So this is a this is an enormous amount of
money to raise in the context of an IPO.
365
00:18:28,960 --> 00:18:33,279
But I just immediately thought, like, well,
what's $10,000,000,000 or even $60,000,000,000
366
00:18:33,279 --> 00:18:34,720
to a $2,000,000,000,000 company?
367
00:18:34,720 --> 00:18:37,440
It's actually not very much money in the grand
scheme of things.
368
00:18:37,440 --> 00:18:42,375
And and it gives them the ability to have and
again, of course, our really deterrence, look,
369
00:18:42,375 --> 00:18:45,974
I assume that Graca's probably building their
own coding agent too or wants to have some
370
00:18:45,974 --> 00:18:46,694
ability to do that.
371
00:18:46,694 --> 00:18:49,015
So I think this is a very interesting tie up.
372
00:18:49,015 --> 00:18:53,974
I'll be curious to see whether the the end
price ends up being closer to 10,000,000,000 or
373
00:18:53,974 --> 00:18:54,375
60,000,000,000.
374
00:18:54,679 --> 00:18:59,400
It is interesting too because the deal terms
that we'll never see likely are what will be
375
00:18:59,400 --> 00:19:03,799
interesting to parse out because right now,
Cursor's trained on Anthropic, OpenAI's models.
376
00:19:03,799 --> 00:19:07,960
And so I wonder, like, is this they have to
kind of, like, co locate all of their training
377
00:19:07,960 --> 00:19:10,585
on what SpaceX, XAI, Grok is doing?
378
00:19:10,585 --> 00:19:13,865
Or they're really just like cruising and and
sharing distribution?
379
00:19:13,865 --> 00:19:14,744
I don't I don't know.
380
00:19:14,744 --> 00:19:18,585
My take is, like, you know, the the last one
they released, they used the Kymi model.
381
00:19:18,585 --> 00:19:22,904
They're they're musing, I think, wisely, trying
to find good open source models so that they're
382
00:19:22,904 --> 00:19:26,049
not dependent on their competitors for infrared
models.
383
00:19:26,049 --> 00:19:27,649
And I don't use cursor anymore.
384
00:19:27,649 --> 00:19:29,250
I've sort of gone all in on Cloud Code.
385
00:19:29,250 --> 00:19:32,289
But I have friends who use cursor who've been
very happy with the new models.
386
00:19:32,289 --> 00:19:33,889
And obviously, they're open source.
387
00:19:33,889 --> 00:19:35,970
They're much cheaper to serve.
388
00:19:35,970 --> 00:19:39,095
And if you had, you know to me, the logic of
the deal actually makes sense.
389
00:19:39,095 --> 00:19:42,214
If you're a cursor, like, I gotta find a lot of
compute somewhere.
390
00:19:42,294 --> 00:19:42,615
Yeah.
391
00:19:42,615 --> 00:19:45,894
But, like, our cost to compute on these models
is much lower than it would have been if we
392
00:19:45,894 --> 00:19:47,335
were using one of our former partners.
393
00:19:47,335 --> 00:19:49,575
And if you're Grok, you're like, I got all
these I got all this compute.
394
00:19:49,575 --> 00:19:51,095
I gotta find somebody to use it.
395
00:19:51,095 --> 00:19:51,654
Sure.
396
00:19:51,654 --> 00:19:52,615
So it kinda makes sense.
397
00:19:52,960 --> 00:19:54,320
We are all out of time.
398
00:19:54,320 --> 00:19:56,320
Thank you, Charles, for jumping in.
399
00:19:56,320 --> 00:19:58,480
Thank you to our listeners for listening in as
well.
400
00:19:58,480 --> 00:20:01,759
Please like and subscribe, and we will talk
with you all next week.
401
00:20:01,759 --> 00:20:02,400
Thank you.
402
00:20:02,400 --> 00:20:02,720
Bye.
403
00:20:08,864 --> 00:20:09,184
Wow.
00:00:00,560 --> 00:00:05,200
Strategy always looks easier in a business
school case study than it does in real life
2
00:00:05,200 --> 00:00:07,919
because in real life, you don't actually know
what happens at the end.
3
00:00:07,919 --> 00:00:12,000
I've had portfolio companies of ours sort of
had somebody sneak up on them and eat a part of
4
00:00:12,000 --> 00:00:13,505
their lunch and vice versa.
5
00:00:13,505 --> 00:00:17,425
So I think this is one of the challenges in
dynamic tech markets is you don't always know
6
00:00:17,425 --> 00:00:20,545
what new feature or what new thing is really
gonna matter at the end.
7
00:00:20,785 --> 00:00:22,704
It's the week of April 20.
8
00:00:22,704 --> 00:00:25,505
Welcome to the Learning Corner, a Precursor
Ventures podcast.
9
00:00:28,189 --> 00:00:30,029
Welcome to the Learning Corner by Precursor.
10
00:00:30,029 --> 00:00:34,670
I'm Mia Farnam, and I'm joined by RGP and
managing partner Charles Hudson, where we will
11
00:00:34,670 --> 00:00:38,829
be talking through the articles and Goodreads
that caught our team's attention over the past
12
00:00:38,829 --> 00:00:39,309
week.
13
00:00:39,309 --> 00:00:44,335
Our first Goodread this week is a LinkedIn post
from Manny Medina, cofounder of Outreach, and
14
00:00:44,335 --> 00:00:48,335
his reflection on a lesson he wishes he had
fully embraced from the start that the job of a
15
00:00:48,335 --> 00:00:53,454
VC backed founder is to win, and winning means
actively trying to kill your competition.
16
00:00:53,789 --> 00:00:58,270
Early on at Outreach, Manny had no choice but
to outmaneuver rivals who had raised
17
00:00:58,270 --> 00:01:00,750
dramatically more capital, and it worked.
18
00:01:00,829 --> 00:01:05,709
But over time, he says he was talked into going
soft by conventional wisdom like focus on your
19
00:01:05,709 --> 00:01:07,870
own race, and there will be many winners.
20
00:01:07,870 --> 00:01:12,484
Advice he now calls out as fundamentally
misaligned with what founders owe their
21
00:01:12,484 --> 00:01:13,284
investors.
22
00:01:13,364 --> 00:01:18,484
He points to real examples of companies that
won by acquiring or suffocating competitors,
23
00:01:18,484 --> 00:01:23,204
DiscoverOrg, OneTrust, and Salesforce versus
his own company that held back and watched
24
00:01:23,204 --> 00:01:27,579
billion dollar businesses like Apollo and Gong
fill the gaps they left open.
25
00:01:27,819 --> 00:01:30,140
The post mentions of observation at the end.
26
00:01:30,140 --> 00:01:32,619
Uber's market cap is 30 x that of Lyft.
27
00:01:32,619 --> 00:01:37,579
And while everyone can talk about Uber's
leader, most people can't even name who ran
28
00:01:37,579 --> 00:01:38,140
Lyft.
29
00:01:38,140 --> 00:01:45,015
Manny's framing here is really clear that
killing competition is your job as a VC backed
30
00:01:45,015 --> 00:01:45,734
founder.
31
00:01:45,734 --> 00:01:48,775
We've, the podcast and then internally on our
team Yeah.
32
00:01:48,775 --> 00:01:51,974
Also talked about the risks of having your head
too much on a swivel.
33
00:01:51,974 --> 00:01:57,340
So it's difficult to actually focus on your
customers when you're so locked in on people
34
00:01:57,340 --> 00:01:58,620
building around you.
35
00:01:58,620 --> 00:02:01,340
Wanted to pause for your reflections here,
Charles.
36
00:02:01,500 --> 00:02:01,900
Yeah.
37
00:02:01,900 --> 00:02:05,739
The first time I read it, I was like, oh,
there's something in here that resonates, but
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I'm not sure I would describe it in exactly the
same way that Manny did.
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I started thinking about the companies he
mentioned, Uber and Salesforce in particular.
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And I think it wasn't even as much about
killing the competition as it was having this
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really big holistic view of what you're trying
to do.
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And whenever I talked to my friends who worked
at Uber in this ascendant days, they had this
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like world domination idea that we're gonna be
in a lot of businesses, and we're gonna compete
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in a lot of geographies.
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And that's what it's gonna take to become the
global leader in transportation, logistics, and
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delivery.
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And I think it was more about the breadth of
the vision required them to win in all of the
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and remember, like, didn't win everywhere.
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They spent a lot of money.
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But I will say Uber competed in every region,
in every geo, in every category that they went
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into.
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And if I think about Salesforce, I think my
sense has always been that's a company that
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wanted to be one of the, if not the most
important software vendor to their customers.
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And to do that, you have to provide more of the
things that your customers need.
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And again, not every acquisition that
Salesforce has made has worked out.
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But Salesforce has always been, I think,
aggressive in trying to make sure that if one
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of our customers has a business problem,
whether it's customer service, whether it's
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CRM, we should have a solution for them.
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And I think it to me, it's more about two
things.
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What does it mean to kind of dominate your
category?
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Well, sometimes dominating your category does
mean you have to snuff out competition early to
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not give them room.
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And sometimes it means figuring out, like,
well, how much space can we really take up in
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our customers' lives?
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And how do I make sure that we're executing on
a strategy that maximizes that?
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And to be fair to many, I don't think a lot of
investors thought that companies like Gong and
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Apollo I met the Apollo team early.
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I was like, this is a really neat feature or a
really neat tool.
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And so I think the the danger is if you try to
kill everything, like, you don't build anything
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on your own.
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You're just being very reactive.
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And it's hard sometimes.
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You know, we have to put this in our team
meeting.
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Strategy always looks easier in a business
school case study than it does in real life
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because in real life, you don't actually know
what happens at the end.
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And so we've been on both ends.
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I've had portfolio companies of ours sort of
had somebody sneak up on them and eat a part of
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their lunch and and vice versa.
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So I think this is one of the challenges in
dynamic tech markets is you don't always know
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what new feature or what new thing is really
gonna matter in the end.
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00:04:16,540 --> 00:04:20,860
I wanna talk about the piece that Manny
mentioned earlier about competitors who raise
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far more capital than you did, which seems to
be happening more and more, especially if
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you're building with an AI.
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If that is the space that you're in as a
founder and you see a quasi competitor or a
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direct competitor come out of stealth having
raised three to four x the amount of capital
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that you did, how do you make the decision as a
founder of how much to take that into
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consideration when you're running after the
same customers?
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Or do you really try to just stay focused on
the path that you have already outlined for
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yourself?
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I find that that's Yeah.
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Just something that comes up in meetings with
founders oftentimes when they it's like the
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elephant in the room almost.
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As investors, I've never felt like it's a
helpful thing to bring up of like, oh, did you
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see the 30,000,000 like, it's just obviously,
they've seen it.
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I don't unless I have something really valuable
to share about how they can use that to their
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advantage, I just don't think it's a good use
of time.
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But I don't know sometimes if founders know
where to prioritize after seeing stuff like
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that.
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I just talked to a founder in our portfolio
who's selling her company.
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And she said, look, a bunch of my competitors
have raised a ton of money.
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None of their businesses are really working,
but a, they've sort of sucked the fundraising
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oxygen out of the room.
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And b, like, they're engaging in business
practices that, like, don't make any sense from
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a pricing go to market standpoint.
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And she's just like, I don't know if any of
them will win, and I'm not gonna pick on
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specific companies.
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00:05:42,169 --> 00:05:46,774
But I can think of a few categories where VCs
piled in, funded a bunch of other companies,
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and then the VCs moved on, but those founders
were stuck with those businesses.
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They raised $50.60, $70,000,000 to dominate a
category and turned out the category either was
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harder to dominate or was less interesting than
originally thought, and they're still running
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those businesses.
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And I'm like, well, to what end?
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My sense is when people raise lots of money, it
tends to create some fairly predictable
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distortions in your category.
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They tend to spend a lot more money on GTM, so
they will flood the zone from a marketing
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standpoint.
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00:06:14,399 --> 00:06:17,855
The smart companies will spend that money in
ways that actually create value.
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A lot of it's wasted.
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They will look around at like, hey.
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We have product and technology gaps.
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We should maybe go acquire companies that can
help us solve those things, and cash makes that
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easier.
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I think the third thing is I tend to find the
people who are able to raise those routes are
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naturally more aggressive Mhmm.
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Or can convince VCs that their vision for the
category or the product is more expansive.
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00:06:38,629 --> 00:06:40,709
So it's kind of like a what's first?
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Is it the expansive vision that comes first, or
is it the money that enables expansive vision?
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I'm pretty sure it's the expansive vision that
comes first.
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And then once you've got the $30,000,000, you
probably told the investors, hey, we're gonna
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flood the zone with marketing.
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We're gonna go acquire some smaller companies,
and we're gonna patch this thing together, and
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we're gonna build the brand.
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And yes, is it a Frankenstein company?
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Sure.
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All those all those things apply.
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But I think for the people who are wired that
way, that playbook's never been easier to
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execute than it is right now.
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The one thing that I do want founders to
prioritize, or they just have to if they're
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going out to raise money and they have
competitors who have raised much more capital
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than they have in the market, is like you have
to be able to speak to the story as to what
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your competitors have done that you're not
going to be doing that's going to be more
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effective.
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00:07:20,884 --> 00:07:24,165
Because to your point, I find that's actually
the likely scenario.
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There's been way more money that's flooded into
a specific industry that leaves scar tissue
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with investors.
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00:07:29,365 --> 00:07:33,689
So it's not like, oh, these wonderful
experiences make me more excited to jump in.
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I've seen that a lot with health care.
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If we've done this back in 2021, we're all set.
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So I would say for founders who see competitors
building, if you were choosing to wanna stay
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your path, just know that you do have to speak
to the folks who are in your own space and how
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you're gonna be differentiated and maybe what
they've left open as gaps that you can take
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over.
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You have to be educated about that space for
sure.
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And and I think you have to be realistic.
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I sometimes Yeah.
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Hear founders tell me a story and I'm like, I
understand why you want that to true.
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That, oh, you know, the product sucks and this
and that.
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But is it true?
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And I think it takes a lot of intellectual
honesty to be able to say that, like, yeah,
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it's frustrating when your when your competitor
who you think has an inferior product raises a
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lot of money.
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The dismissal can't be, well, their product
sucks.
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Well, they have a lot of money.
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They're probably doing something.
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So let's at least be honest about what are the
things that they're doing that we cannot do?
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Yeah.
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Also, the product could suck, but does that
even matter?
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Like, if I I would say for most b to b SaaS
features and products that are sold at Fortune
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500 companies, they're not good products.
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But they have multi million dollar deals under
the belt, which means that it stinks.
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But people are happy to use this, like, half
baked product because it's what they've used
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before.
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So being realistic is such a throughput here.
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Our next Goodread is also a LinkedIn post from
Samir Kaji, CEO of Allocate and host of Venture
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Unlocked, sharing what he calls his fundamental
truths in VC right now.
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00:08:49,914 --> 00:08:53,195
It's a really tight list of observations, but a
few stood out.
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The barbell between large and small VC firms is
wider than it ever has been, and LPs should
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treat them as entirely distinct asset classes.
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00:09:02,470 --> 00:09:07,845
Zmir also flags that no portfolio construction
model, whether concentrated or diversified,
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00:09:07,845 --> 00:09:09,845
rescues a bad portfolio.
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00:09:10,004 --> 00:09:13,605
And that the real variable is whether you are
in great companies to begin with.
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00:09:13,605 --> 00:09:18,485
He raises a quiet but growing concern around
ARR reporting, noting that founders are
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increasingly coached to show growth to maintain
valuations, and that is getting dangerous.
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He closes on a note of honest uncertainty about
AI, arguing that the people who sound most
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certain about how it all plays out tend to be
the most financially invested in a particular
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outcome being true.
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00:09:34,174 --> 00:09:39,294
Samir says that the barbell between large and
small firms is as wide as it's ever been, and
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they're just genuinely two different asset
classes now.
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00:09:41,774 --> 00:09:47,534
As a seed investor, how do you think about
where we sit or maybe, you know, folks who've
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started funds back ten years ago are and
haven't grown their fund sizes out too
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00:09:53,690 --> 00:09:55,850
tremendously just to keep that same strategy?
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00:09:55,850 --> 00:10:00,409
And has the pressure from both ends changed how
you see the firm operating at all?
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I didn't realize this when you picked out.
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00:10:02,250 --> 00:10:05,475
There's like a through line with the last
article too, which is, you know, we talked
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about what do you do when you're a portfolio
company.
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00:10:08,034 --> 00:10:10,595
I think the same question applies to venture
capitalists.
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00:10:10,595 --> 00:10:15,875
You know, we've kept our funds small for out of
a mix of strategy, personal preference, a lot
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of things.
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00:10:16,514 --> 00:10:20,750
And I tell a lot of I told a of people last
year, it'd be very comforting to think that
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you're allowed to execute whatever strategy you
want, but the market has the vote too.
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00:10:24,589 --> 00:10:28,669
And so I think part of what's happening in
Venture, we've this has been, I think, the
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theme of the last year, is this continued
pulling apart of small and large firms.
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00:10:33,164 --> 00:10:37,245
And, you know, as a small fund, you gotta
remember, there's a lot of short term
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incentives for you to to mimic the investment
decisions of big firms.
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I just saw someone else posted a one of these
charts.
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These are the seed funds that have the biggest
follow on uptake rate by the big tier one firm.
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00:10:47,870 --> 00:10:48,509
Like, great.
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00:10:48,509 --> 00:10:50,670
I don't I don't know what I don't know what to
do with that information other than to say,
209
00:10:50,670 --> 00:10:51,470
like, congratulations.
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00:10:51,470 --> 00:10:54,830
Like, doesn't necessarily mean that those
companies will be more successful or better.
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It is just a data point.
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00:10:56,430 --> 00:10:58,430
So I think about I think about this a lot.
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Yeah.
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00:10:59,144 --> 00:11:04,345
I'd like to say I spent most of last year re
underwriting the whole use case of small firms
215
00:11:04,345 --> 00:11:05,065
in venture.
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00:11:05,065 --> 00:11:09,065
And I I came away with one big conclusion,
which is on average, to make a broad
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00:11:09,065 --> 00:11:13,304
generalization, most of the larger players in
our space, this whole legibility.
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00:11:13,304 --> 00:11:15,519
This is one of those words that Michael, but I
get it.
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00:11:15,519 --> 00:11:19,840
They're looking for legibility as in, like,
founders with backgrounds and working in
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00:11:19,840 --> 00:11:23,040
categories that are easy to understand and
underwrite for them.
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00:11:23,040 --> 00:11:26,639
So people who went to a narrow set of schools,
people with a really specific set of
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00:11:26,639 --> 00:11:29,174
backgrounds, maybe they graduated from an
accelerator, know.
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00:11:29,174 --> 00:11:31,894
That is not going to be the totality of returns
in venture.
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00:11:31,894 --> 00:11:35,095
If it ever becomes 100%, then everybody else
should just go home.
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00:11:35,174 --> 00:11:37,174
But I think we're far from that world.
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00:11:37,174 --> 00:11:42,360
And so I do think that no matter what your
strategy is in venture, you should constantly
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00:11:42,360 --> 00:11:45,959
re underwrite it every twelve to twenty four
months and say, like, is the thing I'm doing
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00:11:46,120 --> 00:11:49,559
does it still make and I'm I'm I've talked to a
lot of friends who are simultaneously
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00:11:49,559 --> 00:11:54,199
increasing their fund size and becoming even
more concentrated because they're like, look,
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the only way to make the returns math work is
we need more money to compete for the best
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00:11:58,714 --> 00:11:59,274
deals.
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00:11:59,274 --> 00:12:01,514
And when we win them, we have to own more of
them.
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00:12:01,514 --> 00:12:06,315
And I'm like, that is a strategy that's based
on a set of assumptions about where venture is
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00:12:06,315 --> 00:12:06,794
going.
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00:12:06,794 --> 00:12:08,955
And if you're right, then that's the right
strategy.
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00:12:08,955 --> 00:12:10,634
If not, you're gonna end up with a gigantic
hole.
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00:12:10,910 --> 00:12:14,750
So I think strategy making right now for VCs is
no easier than it is for founders.
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00:12:14,750 --> 00:12:17,549
And the other thing I will say is that I read
everything Sameer writes.
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00:12:17,549 --> 00:12:21,950
I would say a subtle tone shift from him
expressing caution about AI.
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00:12:21,950 --> 00:12:27,254
He's been one of the most bullish, positive, I
wouldn't say unabashed, but really positive AI
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voices I know.
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And I think I too have had the same questions
and concerns around ARR reporting and, you
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00:12:32,855 --> 00:12:34,615
know, forcing people to grow.
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It's dangerous.
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00:12:35,840 --> 00:12:36,480
So Yeah.
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00:12:36,559 --> 00:12:37,759
It's really a tough time.
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00:12:37,759 --> 00:12:42,160
Do you think that last piece that you mentioned
of making sure you're being cautious around
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reporting, do you think that that's something
that is a call for maybe LPs to carry out a
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little bit more heavily?
250
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Because I think in our job, we've known this to
be true for the last year and a half.
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I think part of the challenge is the reward to
caution is you maybe don't raise your route.
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And the question is, like, are companies
fooling VCs or are VCs in on it too?
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I kinda think it's more of the latter.
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You don't have to usually scratch too hard to
figure out, is this ARR number, is it all
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00:13:06,779 --> 00:13:08,459
deployed or is some of it contracted?
256
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As someone once said, they have to pay you
twice before you can call it recurring.
257
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There there's a lot of things that but the
question is, like, how hard do you wanna look?
258
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And I I don't think that many VCs I know are
actively being misled.
259
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I think they're choosing to say, look, there's
a chance that this isn't all recurring.
260
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There's a chance that this is a little bit
funny.
261
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But the growth is good, like, everybody's got a
little bit of this funny on the books.
262
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And so as long as we're not investing in fraud,
it's probably okay.
263
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Yeah.
264
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That that is a position to take.
265
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I was at a breakfast yesterday, and it was a
mix of, like, LPs and GPs.
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And one person was at a CBC of a large Fortune
500 company.
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I'm not gonna name which one.
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And he mentioned that in the past year alone,
their company signed off for 02/1963 pilots for
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new AI tools.
270
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Two of them went through the contract.
271
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It was Adobe and another company that was not
any of the fancy AI companies because I would
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have remembered it.
273
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It was not that.
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And so that really does also reinforce young
companies that you see that state a lot of
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really exciting ARR numbers.
276
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You have to really hammer in of, like, how much
of this is pilot?
277
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And I asked him too.
278
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I said, like, how long are the time lengths for
the pilots?
279
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He said, all range.
280
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It could be a month.
281
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It could be a year.
282
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They're all different types.
283
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We had them simultaneously running, but only
two of them went through.
284
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Do you think 2026 and maybe even the beginning
of 2027 will illuminate any reckonings between
285
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what's real and what's elaborated, or do you
think we've got still a little bit more to go
286
00:14:32,195 --> 00:14:32,674
here?
287
00:14:32,754 --> 00:14:34,434
I do for a very different reason.
288
00:14:34,434 --> 00:14:36,995
It's a small thing, but a lot of people I don't
notice.
289
00:14:36,995 --> 00:14:40,009
You know, Anthropic took Claude Code out of the
pro plan.
290
00:14:40,009 --> 00:14:41,289
I use Mac, so it's fine.
291
00:14:41,289 --> 00:14:46,809
I do think one thing that's gonna happen is
we're definitely in the $5 get across town in
292
00:14:46,809 --> 00:14:49,289
San Francisco Uber era of tokens.
293
00:14:49,584 --> 00:14:55,264
And I do think as that gap between true cost
and cost of the consumer begins to close, some
294
00:14:55,264 --> 00:14:57,904
things right now that are not worth paying
attention to because they're little
295
00:14:57,904 --> 00:14:58,384
experiments.
296
00:14:58,384 --> 00:14:59,504
People are gonna say, wait a minute.
297
00:14:59,504 --> 00:15:00,945
How much are we spending on that thing?
298
00:15:00,945 --> 00:15:02,784
Are we really getting anything out of it?
299
00:15:02,784 --> 00:15:07,190
And I think prices will go up to consumers, to
business consumers, and scrutiny will go up.
300
00:15:07,190 --> 00:15:10,629
I think the other thing is many of these things
have been running long enough that people ought
301
00:15:10,629 --> 00:15:12,309
to be seeing some ROI from them.
302
00:15:12,309 --> 00:15:16,389
And so I think there's gonna be a combination
of factors that are gonna make it harder to
303
00:15:16,389 --> 00:15:21,485
sell the AI dream without some reality in the
back half of this year and all of next year.
304
00:15:21,485 --> 00:15:21,884
Yeah.
305
00:15:21,884 --> 00:15:26,764
I assume that founders will have to be able to
show the ROI much quicker than you would be
306
00:15:26,764 --> 00:15:31,620
able to kind of like show a little AI dance
before and by like six or seven months to just
307
00:15:31,620 --> 00:15:31,779
kind
308
00:15:31,779 --> 00:15:32,019
of Yeah.
309
00:15:32,100 --> 00:15:33,220
Win people over.
310
00:15:33,220 --> 00:15:38,899
Our last piece this week is a post on X from
Tuesday night from SpaceX announcing a new
311
00:15:38,899 --> 00:15:42,580
partnership with Cursor to build what they're
calling the world's most useful models for
312
00:15:42,580 --> 00:15:43,940
coding and knowledge work.
313
00:15:44,225 --> 00:15:49,184
Cursor brings leading product and distribution
to expert software engineers and SpaceX brings
314
00:15:49,184 --> 00:15:53,345
Colossus, their million h 100 equivalent
training supercomputer to the table.
315
00:15:53,345 --> 00:15:57,504
What makes this one really worth discussing is
the deal structure attached to it that we
316
00:15:57,504 --> 00:15:59,985
really only know service level on of of what's
been shared.
317
00:16:00,200 --> 00:16:04,440
SpaceX has been granted the right to acquire
Cursor later this year at a $60,000,000,000
318
00:16:04,440 --> 00:16:08,759
valuation or alternatively pay $10,000,000,000
for the work produced through the
319
00:16:08,759 --> 00:16:09,559
collaboration.
320
00:16:09,559 --> 00:16:15,960
For context, Cursor only recently crossed
500,000,000 in ARR, making a $60,000,000,000
321
00:16:15,485 --> 00:16:20,685
price a jaw dropping multiple and a signal of
just how aggressively the market is pricing AI
322
00:16:20,685 --> 00:16:22,685
infrastructure and distribution right now.
323
00:16:22,764 --> 00:16:25,644
That deal structure obviously is is what caught
my eye here.
324
00:16:25,644 --> 00:16:29,805
SpaceX essentially has an option to buy it at
60,000,000,000 or pay 10,000,000,000 for the
325
00:16:29,805 --> 00:16:30,605
output of the partnership.
326
00:16:31,080 --> 00:16:35,800
What does that structure tell you about how
companies are thinking about locking in AI
327
00:16:35,800 --> 00:16:38,680
capability before the window, quote unquote,
closes?
328
00:16:38,680 --> 00:16:43,480
It reminds me of a very convoluted Microsoft
OpenAI deal back in the day where they're gonna
329
00:16:43,480 --> 00:16:44,279
buy some compute.
330
00:16:44,279 --> 00:16:47,945
The person who sent me this right before it got
announced, I was like, oh, wow.
331
00:16:47,945 --> 00:16:48,504
Are you sure?
332
00:16:48,504 --> 00:16:52,105
I but immediately, I was like, are you sure
this is from a reputable source, or were you
333
00:16:52,105 --> 00:16:52,904
spending too much time?
334
00:16:52,904 --> 00:16:53,384
He's like, no.
335
00:16:53,384 --> 00:16:53,545
No.
336
00:16:53,545 --> 00:16:54,665
It's gonna come from SpaceX.
337
00:16:54,665 --> 00:16:56,184
And it it did a couple minutes later.
338
00:16:56,264 --> 00:16:59,545
And I asked him, I said, who's who's saving
who?
339
00:16:59,545 --> 00:17:00,529
And he's like, what do you mean?
340
00:17:00,529 --> 00:17:06,929
I go, is this Cursor helping Grok remain
relevant and get more value out of Colossus?
341
00:17:06,929 --> 00:17:12,769
Or is this Grok helping Cursor remain relevant
by giving them a bunch of compute for their new
342
00:17:12,849 --> 00:17:14,690
for the Kimi based, their their new set of
models?
343
00:17:15,055 --> 00:17:16,974
And he said, could it be both?
344
00:17:16,974 --> 00:17:17,455
I'm like, yeah.
345
00:17:17,455 --> 00:17:19,294
Actually, it could be both.
346
00:17:19,295 --> 00:17:23,375
And so I think there's like a whole another
layer, which is like, if you believe SpaceX
347
00:17:23,375 --> 00:17:29,134
will go public and that the company's valuation
will hold, even in remotely the one to two
348
00:17:29,134 --> 00:17:31,929
trillion dollar range, $10,000,000,000 means
nothing.
349
00:17:31,929 --> 00:17:36,649
I thought about this a was like, it's actually,
for me, fairly interesting that in the end, the
350
00:17:36,649 --> 00:17:41,929
smartest thing to do might have been to sell
Cursor at 30 or 40 or 50 if you had the chance.
351
00:17:41,929 --> 00:17:46,384
In the grand scheme of like how this all plays
out, if it if it trades out at 10, and, you
352
00:17:46,384 --> 00:17:49,984
know, I don't know all of the conditions that
have to be met for that $10,000,000,000 payout
353
00:17:49,984 --> 00:17:50,625
to be made.
354
00:17:50,625 --> 00:17:52,944
These things are it's never that simple.
355
00:17:52,944 --> 00:17:56,625
But it might turn out that a company that we
once thought was worth nothing and then thought
356
00:17:56,625 --> 00:18:01,744
would be the dominant coding player might end
up being a very valuable company, but not
357
00:18:01,319 --> 00:18:03,799
nowhere near as valuable as we had once
thought.
358
00:18:03,799 --> 00:18:06,359
Or it could turn out to be an incredibly
valuable company.
359
00:18:06,359 --> 00:18:09,559
We were all wrong to be skeptical or doubtful
at all.
360
00:18:09,559 --> 00:18:14,835
But a lot of this is contingent on SpaceX's
IPO, and the question I keep coming with, where
361
00:18:14,835 --> 00:18:17,075
do you find that much demand?
362
00:18:17,234 --> 00:18:21,554
Even in Robinhood, like, the irony is a lot of
the big institutions that you would go to for
363
00:18:21,554 --> 00:18:24,355
the IPO, they're already on the books on the
private side.
364
00:18:24,355 --> 00:18:28,960
So this is a this is an enormous amount of
money to raise in the context of an IPO.
365
00:18:28,960 --> 00:18:33,279
But I just immediately thought, like, well,
what's $10,000,000,000 or even $60,000,000,000
366
00:18:33,279 --> 00:18:34,720
to a $2,000,000,000,000 company?
367
00:18:34,720 --> 00:18:37,440
It's actually not very much money in the grand
scheme of things.
368
00:18:37,440 --> 00:18:42,375
And and it gives them the ability to have and
again, of course, our really deterrence, look,
369
00:18:42,375 --> 00:18:45,974
I assume that Graca's probably building their
own coding agent too or wants to have some
370
00:18:45,974 --> 00:18:46,694
ability to do that.
371
00:18:46,694 --> 00:18:49,015
So I think this is a very interesting tie up.
372
00:18:49,015 --> 00:18:53,974
I'll be curious to see whether the the end
price ends up being closer to 10,000,000,000 or
373
00:18:53,974 --> 00:18:54,375
60,000,000,000.
374
00:18:54,679 --> 00:18:59,400
It is interesting too because the deal terms
that we'll never see likely are what will be
375
00:18:59,400 --> 00:19:03,799
interesting to parse out because right now,
Cursor's trained on Anthropic, OpenAI's models.
376
00:19:03,799 --> 00:19:07,960
And so I wonder, like, is this they have to
kind of, like, co locate all of their training
377
00:19:07,960 --> 00:19:10,585
on what SpaceX, XAI, Grok is doing?
378
00:19:10,585 --> 00:19:13,865
Or they're really just like cruising and and
sharing distribution?
379
00:19:13,865 --> 00:19:14,744
I don't I don't know.
380
00:19:14,744 --> 00:19:18,585
My take is, like, you know, the the last one
they released, they used the Kymi model.
381
00:19:18,585 --> 00:19:22,904
They're they're musing, I think, wisely, trying
to find good open source models so that they're
382
00:19:22,904 --> 00:19:26,049
not dependent on their competitors for infrared
models.
383
00:19:26,049 --> 00:19:27,649
And I don't use cursor anymore.
384
00:19:27,649 --> 00:19:29,250
I've sort of gone all in on Cloud Code.
385
00:19:29,250 --> 00:19:32,289
But I have friends who use cursor who've been
very happy with the new models.
386
00:19:32,289 --> 00:19:33,889
And obviously, they're open source.
387
00:19:33,889 --> 00:19:35,970
They're much cheaper to serve.
388
00:19:35,970 --> 00:19:39,095
And if you had, you know to me, the logic of
the deal actually makes sense.
389
00:19:39,095 --> 00:19:42,214
If you're a cursor, like, I gotta find a lot of
compute somewhere.
390
00:19:42,294 --> 00:19:42,615
Yeah.
391
00:19:42,615 --> 00:19:45,894
But, like, our cost to compute on these models
is much lower than it would have been if we
392
00:19:45,894 --> 00:19:47,335
were using one of our former partners.
393
00:19:47,335 --> 00:19:49,575
And if you're Grok, you're like, I got all
these I got all this compute.
394
00:19:49,575 --> 00:19:51,095
I gotta find somebody to use it.
395
00:19:51,095 --> 00:19:51,654
Sure.
396
00:19:51,654 --> 00:19:52,615
So it kinda makes sense.
397
00:19:52,960 --> 00:19:54,320
We are all out of time.
398
00:19:54,320 --> 00:19:56,320
Thank you, Charles, for jumping in.
399
00:19:56,320 --> 00:19:58,480
Thank you to our listeners for listening in as
well.
400
00:19:58,480 --> 00:20:01,759
Please like and subscribe, and we will talk
with you all next week.
401
00:20:01,759 --> 00:20:02,400
Thank you.
402
00:20:02,400 --> 00:20:02,720
Bye.
403
00:20:08,864 --> 00:20:09,184
Wow.
