This Week in Startups
00:01:08 · S0, Lon Harris
[00:01:08] S0: Got it. Alright. Let's get started with our first story. [00:01:11] S1: We're gonna talk about, Anthropic. Of course, they filed their public s one on Monday for a NASDAQ listing as A and T Ant with the price range and share count left blank for now. Revenue for the first half of the year came in at 16,300,000,000. That's up 14 x from around 1,200,000,000 in the first half of twenty twenty five. Q two this year saw an operating profit of 974,000,000. Net loss was 80,700,000,000, but 72,400,000,000 of that was driven by a non cash accounting charge on convertible notes, derivative liabilities, and safes, which were marked up as the company's valuation rises. The Wall Street Journal reports that Anthropic aims to go public the week of November 16, raising a 100,000,000,000 or more at a valuation of around 1.5 to 2,000,000,000,000. So, T. A, we've got five or six subsections here, many different ways to go. What stands out to you about the Anthropic s one in this story?
00:01:11 · Lon Harris, D.A. Wallach
[00:01:11] S1: We're gonna talk about, Anthropic. Of course, they filed their public s one on Monday for a NASDAQ listing as A and T Ant with the price range and share count left blank for now. Revenue for the first half of the year came in at 16,300,000,000. That's up 14 x from around 1,200,000,000 in the first half of twenty twenty five. Q two this year saw an operating profit of 974,000,000. Net loss was 80,700,000,000, but 72,400,000,000 of that was driven by a non cash accounting charge on convertible notes, derivative liabilities, and safes, which were marked up as the company's valuation rises. The Wall Street Journal reports that Anthropic aims to go public the week of November 16, raising a 100,000,000,000 or more at a valuation of around 1.5 to 2,000,000,000,000. So, T. A, we've got five or six subsections here, many different ways to go. What stands out to you about the Anthropic s one in this story? [00:02:07] S2: Well, I mean, I think, like, with with everything that's happening in AI, the hard part is figuring out what sales pitch and what's reality. And obviously, this was timed and positioned in such a way as to sort of comfort the market as to the company's profitability or potential profitability. So there's of course been this raging debate over whether inference is profitable, how much money they're losing. And I think the clear intention of the timing and the way this was all framed was to put everyone at ease, say, look, we're sitting on a ton of cash and we're not spending as much as you think we might be and it's all gonna be okay.
00:02:07 · D.A. Wallach, S0
[00:02:07] S2: Well, I mean, I think, like, with with everything that's happening in AI, the hard part is figuring out what sales pitch and what's reality. And obviously, this was timed and positioned in such a way as to sort of comfort the market as to the company's profitability or potential profitability. So there's of course been this raging debate over whether inference is profitable, how much money they're losing. And I think the clear intention of the timing and the way this was all framed was to put everyone at ease, say, look, we're sitting on a ton of cash and we're not spending as much as you think we might be and it's all gonna be okay. [00:02:48] S0: Did they accomplish that task? [00:02:51] S2: Is everybody feeling don't know what the hell is going on. You know, it's like you're seeing these little fragmentary views of the elephant every week and every Gavin Baker interview and every all in podcast or whatever, but you still never get to see the whole elephant. So, of course, that's what investing is. You got to make sense out of fragmented information and try to paint a picture of what's happening, but I still have no idea what's happening.
00:02:51 · D.A. Wallach, S0
[00:02:51] S2: Is everybody feeling don't know what the hell is going on. You know, it's like you're seeing these little fragmentary views of the elephant every week and every Gavin Baker interview and every all in podcast or whatever, but you still never get to see the whole elephant. So, of course, that's what investing is. You got to make sense out of fragmented information and try to paint a picture of what's happening, but I still have no idea what's happening. [00:03:16] S0: Which is very similar, by the way, to poker. You are trying to make really good decisions with partial information, Like I know my whole cards, but I don't know who yours or the other seven people at the table. Maybe no three cards on the flop, but I still don't know the turn in the river to come. I think that's actually a great way of framing it. Dave, when you saw the numbers drop and you start unpacking the hand, do you feel more bullish on the AI trade? Do you feel like this is making people more confident in what's being built out here and the sustainability of it? Or do you feel like you have more questions rather than answers?
00:03:16 · S0, Dave McClure
[00:03:16] S0: Which is very similar, by the way, to poker. You are trying to make really good decisions with partial information, Like I know my whole cards, but I don't know who yours or the other seven people at the table. Maybe no three cards on the flop, but I still don't know the turn in the river to come. I think that's actually a great way of framing it. Dave, when you saw the numbers drop and you start unpacking the hand, do you feel more bullish on the AI trade? Do you feel like this is making people more confident in what's being built out here and the sustainability of it? Or do you feel like you have more questions rather than answers? [00:03:54] S3: I I feel like they did themselves a favor. You know, I think there's been a lot of concerns in the last quarter that revenue might have been plateauing. I I think we still have those concerns. You know, questions about whether OpenAI is taking share, whether OpenWeight models are taking share. Company looks like they are profitable. Looks like they've been, you know, on an operating basis profitable for the last two quarters. It looks like CapEx spend is crazy. That... That's, you know, over $500,000,000,000 of CapEx. I I don't know over what period of time, but, you know, $100,000,000,000 plus commitments to both Google and Amazon, which are locked in. [00:04:30] S0: Well, maybe unpack that for a minute then, Dave. If that's where the first thing that came to your mind is crazy, how does one go from crazy to sustainable connect the gap between CapEx spend and revenue and profitability? Take a moment there.
00:04:30 · S0, Dave McClure
[00:04:30] S0: Well, maybe unpack that for a minute then, Dave. If that's where the first thing that came to your mind is crazy, how does one go from crazy to sustainable connect the gap between CapEx spend and revenue and profitability? Take a moment there. [00:04:46] S3: If they had gone public last quarter, I think everybody would have been happy with putting a 2,000,000,000,000 to $3,000,000,000,000 valuation on the company. But if you look at... I don't know if we can share the graph of ticker trends. This is Anthropic revenue, this is OpenAI revenue. [00:05:01] S0: Okay. So when we're looking at the Anthropic revenue, this is companywide annualized revenue run rate. We just did a story about this in newsletter, actually. This is R as in a pirate, A R R. When you see that, which is not to be confused with ARR, with three Rs, annualized run rate is typically done by taking the last month or the last quarter and timesing it either by that period of time, twelve or four. And here what we're seeing is it's flat at 76,800,000,000 in ARR. And you see here, even on this website, they put ARR, which would lead you to believe it's annualized reoccurring revenue. Annualized reoccurring revenue is for subscription products like Netflix or your Verizon account, it's distinctly different than this. So what's your takeaway here? Obviously we see flat, but what is that based on? Where did they get that number?