The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:02:46 · Harry Stebbings, Rory O'Driscoll
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00:04:10 · Harry Stebbings, Dev Ittycheria, Rory O'Driscoll, Jason Lemkin
[00:04:10] S3: Boys, it is so good to be back, and we have a phenomenal guest joining us today. Dave, thank you so much for joining us, dude. [00:04:17] S1: Thank you, Harry. Thanks for inviting me and being part of this amazing group. [00:04:21] S3: Do you know what? Actually, I don't know if you guys know, but Dave gave me feedback that we needed to move on faster from just OpenAI and Anthropic. [00:04:29] S0: I love it. [00:04:29] S3: And we really took it to heart. And so taking it to heart, I thought we'd start on OpenAI. [00:04:34] S2: Well done. [00:04:35] S3: OpenAI nears a $70,000,000,000 run rate and goes for 30,000,000,000 at 1,400,000,000,000. But the IPO is gonna wait until 2027 despite Anthropic going out in the next few weeks, it would seem. What do we think, boys?
00:04:35 · Harry Stebbings, Jason Lemkin
[00:04:35] S3: OpenAI nears a $70,000,000,000 run rate and goes for 30,000,000,000 at 1,400,000,000,000. But the IPO is gonna wait until 2027 despite Anthropic going out in the next few weeks, it would seem. What do we think, boys? [00:04:50] S2: The crazy thing to me when I think about the story is, I mean, OpenAI is back. Right? 70,000,000,000 in revenue. But more importantly, if you look at your portfolio companies and others, Astra, Sol, and Loon are everywhere, right? Everyone's using them. Everyone is using them. And when you think where we started this year, a lot of things in B2B only worked like at the end of last year and like only Anthropic could get this stuff to work. And even coding at the start of this year only worked on Anthropic. And then we went into the summer and it kind of seemed like, know, OpenEye in some ways was on the rope because consumer was the wrong path and they couldn't get back. So only October something if I mean, rate of change here and the rate at which the OpenAI team got back in the game and made something that is truly, epically competitive to the point where people are switching out their models for real because it's better and cheaper. It's crazy that pace at that scale and it's 70,000,000,000. It says it all, right? So, I mean, when you counted them out three or four months ago, not literally, but figuratively. And now if they launch a truly competitive set of model LMs, it's true... It's all, like, instantly massively competitive. It's crazy. Massive kudos, I think.
00:05:57 · Harry Stebbings, Dev Ittycheria, Jason Lemkin
[00:05:57] S3: What happens if Anthropic's numbers for q three aren't blow out? Like, every team that I speak to has at least deviated some meaningful portion from Anthropic to Codex, everyone says how amazing it is. What happens if they're not blow out numbers like the world really just assumes Anthropic always has now? [00:06:16] S1: The interesting thing that we should also learn from this and having sold sold to developers the last twelve plus years is that there's not a lot of loyalty. Developers are very quick to use... To switch from one tool to another or, frankly, use multiple tools. And and I think what we're seeing is that developers are are quick to find the shiny new toy. The question is, you know, what will Claude or Anthropic come out with next? And what are the other alternatives? The other thing that's I think interesting also is that what OpenAI has done is shown that when you have essentially a billion people using ChatGPT a week, that's a great distribution channel. But the... Potentially where the moat is where the enterprise business is. You have to sign contracts. You have to train thousands of employees. You have to build workflows, and it may be hard to switch the DP again to the enterprise. That's kind of a little bit of reaction I had. [00:07:07] S2: Yeah, guess in that sense, OpenAI's run rate's even more impressive, right? I mean, maybe they're already embedded, maybe they're already through procurement, but that's pretty fast changing the enterprise too. [00:07:16] S1: Yes. Yeah.
00:07:16 · Dev Ittycheria, Jason Lemkin
[00:07:16] S1: Yes. Yeah. [00:07:16] S2: Can I ask you a follow-up question? From your seat, do you think that is a blocker for more progress in open weights models in the enterprise? Just the literally the ability to get through procurement, get approved, or do you not? I mean, obviously the explosion this year is crazy, but it is a hurdle to get over. What are you seeing from the Mongo and Sequoia side? [00:07:34] S1: Well, actually from a Mongo side, was just talking to our CIO and we're talking about token costs and token budgets. So cost is a big factor that I think every enterprise has to consider. No one has unlimited budgets. The second thing is IP rights, you know, how we train these models, who gets the data, how proprietary is the data. And I think those two things are also pretty important points when it comes to what models you choose and who you work with.
00:08:01 · Rory O'Driscoll
[00:08:01] S0: As you often do, Howard, you put a lot out there. And I think you forget the valuation stuff, which we haven't even discussed, just a raw number, the 70% Q on Q for OpenAI in Q3. I tweeted at the end of Q2, the OpenAI numbers came out for Q1 and Q2, and the GAAP revenue growth from Q1 to Q2 was 18% quarter on quarter. And you did that math and it was that implied, you know, just under a 100% year on year growth rate, which was massive deceleration at a time when Anthropic was still going 10x. So like at the end of Q2, that was the state of the race. And don't like to make this a horse race because you need to zoom out, but there's a part of it as a horse race. And if you noticed really early on in q three, all the OpenAI teams started really tweeting, we're having a killer July. Do you remember Sarah Fryer coming on that? We're having a killer August. It was clearly that they internalized that Q2 was the first time Anthropic and GAAP revenue was larger than them, and it just felt like they were pulling away. You know, 11,000,000,000 versus 6,800,000,000, growing 10x versus growing 2x. Suddenly, a 70% number, no matter what we'll talk about OnTropic in a second, no matter what OnTropic does, at least changes that narrative back. If it really is correct, and we don't know, but if GAAP revenue grows 70% Q on Q or even 60%, up from 18% Q1 to Q2, that's a massive re acceleration. And, you know, just starting with a huge win and the big freaking sigh of relief, because given the OpenAI forward purchases of just about everything from compute to data centers to land in Virginia. If they didn't grow at a hyper speed, a lot of things come unstuck. So that's the first thing, which is, if true, amazing for OpenAI. And then you're right, the second thing is, did that come and this is where the dev comment on developer loyalty is important is that, did it all come at the expense of Anthropic? In other words, you're asking the question, is this a rotating share game? They accelerated 70% and then Anthropic slowed down markedly, or did they both grow pretty well, in which case you can lean into the TAM. And you're right, if the OpenAI growth rate was the key missing card, the missing data point, now that you've allegedly seen that card, and again, we're assuming the 70% is correct, you're exactly right.