The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
01:03:48 · Rory O'Driscoll, Jason Lemkin, Harry Stebbings
It's just made you couple billion bucks. [01:03:50] S2: Also, you know, just to be tech... I mean, the round's led by Samsung. Right? So they're generating, I think, 200,000,000,000 of free cash flow a year right now. So 3,000,000,000, like, I don't know if I take the markup. I mean, I guess I would take the markup, but you could argue it should have an asterisk and a dagger next to it because is it really real if it's led by Samsung. Right? [01:04:08] S0: Well, and the last round was led by ASML. [01:04:10] S2: Yeah. Don't know if those count. [01:04:12] S1: But the the money counts. I I agree. Look. The valuation. The [01:04:15] S2: the money counts, but I don't know if the valuation is is connected to any react... Like, we should that it's the same as an objective valuation done by financial parties. Just, it's just odd. Right? [01:04:26] S1: Is some intrinsic value to be like, you know, if... I mean, let's ask what the... I mean, brutal comment. If the American winners are worth 1,000,000,000,000 and the European GDP is roughly 70, 80% of the American GDP, I don't think that implies to be clear 800,000,000,000, but you might get to 30, 40, 50. It's it's not a crazy end state, but I agree, Jason. It feels like your problem... I don't think they did it on the basis of market comps and comp goals. I think they did it on the basis of state strategically. [01:04:54] S0: Boyce, is there any others that I've missed that you think we should do?
01:04:54 · Harry Stebbings, Rory O'Driscoll, Jason Lemkin
[01:04:54] S0: Boyce, is there any others that I've missed that you think we should do? [01:04:58] S1: I mean, I'm just trying to find interesting private stuff. I mean, Jason, any comment on Adobe linking on? A new CEO taking over. I saw the results. Any any thoughts? Because you're the Adobe expert here. [01:05:09] S2: I I think it's great. You take two nonfounder folks slowly leading different business units into no growth and you pick from the lesser of two okay leaders. I mean, you know, I think it's just Miro at scale, but with so much scale that it survives, right? You know what it is, it's a reminder that Miro didn't... In today, you know it's funny, if when the three of us met, I told you about this $600,000,000 company in collaboration, we would think that was scale, right? In the old days, it's not scale. Adobe has scale. So even if Adobe isn't really making the right moves in AI and it can't really afford it and it's just moving the deck chairs around for its CEO team, where the CEO said like a year ago, Shantanu said he's going to retire and it took him a year to decide which of the two internal candidates to promote. I mean, it's pretty bad. Think it's a nothing burger. You know what it is, Rory? It's a sign just nothing nothing's gonna change. It's a sign of capitulation. It's a sign that we're gonna just keep bulldozing our way through the world the same way versus really changing. Super high margin, bleed our core products, add some imaging with AI and kind of call it a day, right?
01:05:09 · Jason Lemkin, Rory O'Driscoll
[01:05:09] S2: I I think it's great. You take two nonfounder folks slowly leading different business units into no growth and you pick from the lesser of two okay leaders. I mean, you know, I think it's just Miro at scale, but with so much scale that it survives, right? You know what it is, it's a reminder that Miro didn't... In today, you know it's funny, if when the three of us met, I told you about this $600,000,000 company in collaboration, we would think that was scale, right? In the old days, it's not scale. Adobe has scale. So even if Adobe isn't really making the right moves in AI and it can't really afford it and it's just moving the deck chairs around for its CEO team, where the CEO said like a year ago, Shantanu said he's going to retire and it took him a year to decide which of the two internal candidates to promote. I mean, it's pretty bad. Think it's a nothing burger. You know what it is, Rory? It's a sign just nothing nothing's gonna change. It's a sign of capitulation. It's a sign that we're gonna just keep bulldozing our way through the world the same way versus really changing. Super high margin, bleed our core products, add some imaging with AI and kind of call it a day, right? [01:06:13] S1: I broadly agree with you and it's interesting. They did the, you know, we're not leaning into ARR growth, we're leaning into getting free usage and that was play they did in the nine That's their [01:06:23] S2: fake AI metric of the week.
01:06:23 · Jason Lemkin, Rory O'Driscoll, Harry Stebbings
[01:06:23] S2: fake AI metric of the week. [01:06:25] S1: And that's where I was going. I I think, you know, because this is where I... Recently I asked you is that's a playbook that might've worked two or three years ago. But to your point now, what you're basic... Because our net new ARR went down significantly. In other words, the growth of new ARR didn't happen. So they have their AI ARR metric went up, but overall ARR went down. And you know what that means is you're just channeling some into the good thing. But yes, you at least with the program that you need to win, which is a start, but you're not winning because the Jason rule, which I go back to, if it ain't growing, you ain't winning. If people ain't paying for it, you ain't winning. They have scale, they're not going away, 5,000,000,000 in revenue, whatever. There was no news here, which is interesting because overall it's been a pretty good few weeks for software in general. I mean, you've seen big jumps, I'd say huge jumps in the cyber stocks, big jumps overall in World Cloud, and the entire SaaS apocalypse has been unwound. But I think, Jason, to your point, what's been happening is there's been a real distillation of, oh, these kind of businesses aren't gonna be winners. They should stay low, and then these kind of businesses are doing super well. You know, Adobe is in the first... More in the first category than the second. [01:07:30] S0: So, Boys, their market cap today is a 105,000,000,000. [01:07:34] S1: Yeah. About a 100,000,000,000. 25,000,000,000. Yeah. Exactly.
01:07:34 · Rory O'Driscoll, Harry Stebbings, Jason Lemkin
[01:07:34] S1: Yeah. About a 100,000,000,000. 25,000,000,000. Yeah. Exactly. [01:07:36] S0: In three years' time, what is their market cap? [01:07:39] S1: $120,130. [01:07:41] S2: Same as today. It'll be the same as today. [01:07:42] S1: Yeah. Plus or minus. It's not going away. Basically, again, from memory, it's a sub 10 times cash flow multiple, Harry. So unless it... Unless the ARR evaporates, not just doesn't grow but evaporates, you know, you can get there on a cash flow multiple. If Jason's view of the world, the Mendler view of the world is correct, if there are 10 or $125,000,000,000 plus outcomes, which by the way I don't think, the point of your relative significance will go down. I couldn't tell you HP's market cap now to save my life because it doesn't matter. And that's the same thing. You'll do fine, you'll cash flow positive. Maybe if you find the right leader and the right product, you'll reignite growth. Your trajectory is not to blow up, but your trajectory is to trade at eight or nine times cash flow. [01:08:24] S2: Well, that's the way it was for a decade. Adobe Stock didn't move for a decade. It was traded on cash flow. Chantanu was amazing of that. Then cloud worked better than anyone expected. And either they're gonna run that playbook for another decade or they'll have some magical AI thing that even Canva hasn't figured out. I'm not betting on it today, but you know, I was there when cloud happened. They didn't expect it. They could have a killer AI app that just... We're early in the AI thing, so I don't know, man.
01:08:24 · Jason Lemkin, Harry Stebbings, Rory O'Driscoll
[01:08:24] S2: Well, that's the way it was for a decade. Adobe Stock didn't move for a decade. It was traded on cash flow. Chantanu was amazing of that. Then cloud worked better than anyone expected. And either they're gonna run that playbook for another decade or they'll have some magical AI thing that even Canva hasn't figured out. I'm not betting on it today, but you know, I was there when cloud happened. They didn't expect it. They could have a killer AI app that just... We're early in the AI thing, so I don't know, man. [01:08:49] S0: Would you rather invest in Canva or Adobe today? [01:08:53] S2: I'll tell you why you just can't invest in... I want Canva to win very badly, right? I love them. You just can't be not growing. Like ServiceTitan got destroyed for lowering guidance, fell 30% last week, okay? I think Canva fell 30 or 40% this year when they had to lower guidance, right? Maybe more, Right? They're just not public. But you gotta grow. But you... But at least Adobe is gonna get to this stable plane to Rory's prior point. It's gonna get to a stable plane. It's not impressive, but it's gonna grow six or eight or 9% a year with lots of free cash flow. Right? [01:09:23] S1: I'm gonna give you the numbers. Canvas numbers. Right? They are growing. They're growing 20%. They were growing 30%. They're growing at 20% now. And I know that because in Australia, you have to file your revenue with the Watchman columns. [01:09:33] S2: But it's not... But that's a big deceleration.