The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:15:59 · Jason Lemkin, Harry Stebbings
[00:15:59] S0: been higher, but but I bet they got this done in a week. It's it's so damning that Microsoft doesn't want 27% of its people. That that is the age of AI. They don't want them. [00:16:07] S1: Why would you do that if you're Microsoft? What a culture could they... What? So you stay and then know that you're not wanted? Isn't that awful?
00:16:14 · Jason Lemkin
[00:16:14] S0: I think we're trying... I wanna get Rory to say... I think we're... You're trying to do this in a humane way, and I think what we learned is there's no... You know, when layoffs started, like, in late twenty two or so, right, everyone was fried for doing them on Slack or by email. Oh, it's so inhumane. Go meet with people, right? Everyone was... It's not that more humane to meet... Have you seen Office Space? Like, it's not more humane to meet with someone in HR and get fired. And then they were like, Don't do it over the holidays. So they fired people on January 1. That was no better. So this is a way to like make it more humane. It's great for folks that were thinking of leaving anyway. It's great for them, It is great for the folks that are at the either at the tail end of their career or they want to check out of the workforce. And that's why this is so hard to do from a game theory perspective because you might get all the folks that were going to leave anyway, right? But Microsoft has so much cash, who cares? But it's an attempt to be humane and I just... I've been on the other side... It's been a long time since I've been on the other side of a layoff. It's just hard to... It's hard... You try to be a good person, but you can't... It's hard to make it humane. It sucks no matter how you do it. And I think this is the suckiest way because 27% of the company has just been issued a scarlet letter. I think this is the... In attempting to be humane, this is the least humane way to do it. Just fire another 9% in one day, do it on teams, and move on. It's rough.
00:17:25 · Rory O'Driscoll
[00:17:25] S2: It is rough. No. I I think you're right. I I I process the same thing. You've been told to go, but you decide to stay. The only winners are, as you say, the people who've got another job lined up and now have a called option on the severance package. But, you know, it is interesting they think they can do without. If their take rate is 10,000 or 20,000 people, it's clear, it's interesting they can do withthey have around 200,000 employees, so they think they can do without another 10 or 15%, which possibly is true. I mean, you wonder how much it will be AI efficiency, how much of it is just you never needed them. It would be fun to find out. These large companies, as the depreciation bill for the CapEx comes due, you're going to have to find it somewhere else. And we've talked about this. Frankly, earnings this year, 2026, are in that golden period where the people who are selling the semiconductors are booking the gains, but the people who are buying the CapEx aren't booking the depreciation. So everybody's winning. But I think as you start to look to '27, that depreciation is going to start hitting in Microsoft and Google and Meta and places like that. And to keep the operating income up, you're going to be really pushing on headcount. And this is when the bill for AI comes due, and this is how it'll be paid.
00:18:34 · Jason Lemkin, Harry Stebbings, Rory O'Driscoll
[00:18:34] S0: It's brutal. In a sense, it may feed the anti AI frenzy because it's the direct narrative of the story, right? We're going to pay for all this infra, to pay for all these GPUs and infra and inference, we've to get rid of the people. Is you think [00:18:47] S1: 2027 we're going to see that really crystallize even more? [00:18:50] S2: Yes. Intuitively, as time goes by, everyone's trying to call when the hyperscalers start kind of going down the other side of this. So yes, as the depreciation bill mounts up, so far, even though free cash flow has been kind of going the wrong way, everyone's operating income has been going up. And yes, that 'll get harder now. So yes, this will be the problem. This will be the issue.
00:19:09 · Jason Lemkin
[00:19:09] S0: I'm just surprised that the Cloudflare layoffs aren't more discussed because I think it's case study 200 for CEO MBA, right? Cloudflare Matthew comes in epic year for Cloudflare. Every quarter is growing faster, but on May 7 they lay off 20% of the folks. Bam, we don't need it. We're too big. We don't need these folks. We are better off with 80% of the people than we were before, and it keeps accelerating. Every CEO that's arguing about this should just look at, I mean, you can say Microsoft, some of it is the old company and it's and we've got to pay for the for all the AI, but Cloudflare is just like this is just holding us back 20%. It wasn't 8%. It was just boom. We're just going to 20 and no downside to the business that that is apparent yet. I think it's just layoffs 3.0 or 2.0 is just going to happen. It's part of it's to pay for the infrastructure and part of it is just enough already enough of the performative AI, enough of this. We just we just think about every board meeting you've been in over the last week or if you've been in every no matter how well you're doing, it's just stressful. Everything is moving even faster than the last board meeting. There's even more competition in every space. We just carry folks any longer. We can't, or we're going to die. We're going to be killed by that new company Harry just funded or Rory just funded. So there's no stability. The tough part about the Microsofts and the Salesforces and the SAPs and every SaaS company back in the day is we were all predicated. We would get to a level, a plane of stability at some point, one hundred, two hundred, three hundred, four hundred, five hundred million of AR. We could kind of breathe. There's no planes of stability at all. Maybe north of 10 or 20 or 40,000,000,000. They just don't exist. So I just think layoffs are just gonna accelerate because we have no choice.
00:20:43 · Harry Stebbings, Rory O'Driscoll
[00:20:43] S1: Speaking of having no choice and where cash comes from, Meta goes to the equity markets. Zuckerberg needs $795,000,000,000. And this week on Monday, it launched a raise of up to 95,000,000,000. 35 common [00:20:57] S2: Yep. [00:20:57] S1: And preferred, 60 at the market program. And the thing to take from that in combination with the fact that chips lose 200,000,000,000 in a day. And public markets in bloodbath as neo clouds shit the bed?