The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
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?
00:21:10 · Rory O'Driscoll
[00:21:10] S2: No, the short answer, Harry, is no. I think there are two separate points that you merge there. And I'm just dealing with each of them in succession. I mean, I think the Meta thing, yeah, which what we talked about, This was the first quarter where their actual CapEx dipped below their free cash flow, right? So they were free cash flow negative, right? Because remember, their core business is one of the best business on the planet. It spits out money. It's awesome, right? So they have $33,000,000,000 a year of cash... A quarter of cash flow, right? It's a great, great, great, great, great business. This is the first quarter they went negative, so they just did some equity. So that's that, and it's totally unrelated. The chip thing, first of all, yeah, I mean, chips moved last week, but let's be frank, since the Anthropic... And I don't know where they'll be when this show comes out, but since the Anthropic S1 hit, chips have been bouncing up because the consensus is that looks good. One thing that the S1 was good for was chips. So those stocks are actually up. In fact, DRAM today is way up, which is the definitive, the one I keep an eye on, the list of the index of memory chips. Yeah, that's why Korea is up 10% today, SK Hynix, right? I actually think the news is, if you're in the semiconductor CapEx business, it's been a good back half of the way. It was scary two weeks ago with Core But, know, CoreWeave is a, I don't know, 20,000,000,000, 30,000,000,000 company, and Anthropic is a $2,000,000,000,000 company that has $200,000,000,000 when this deal closes, and they're gonna spend it all on chips. So chip be happy.
00:22:33 · Jason Lemkin, Harry Stebbings, Rory O'Driscoll
[00:22:33] S0: The only slight counterpoint not to get off chat. It's it's all it's all green, green, green, but it is just... I know it's a different ecosystem, and I know it is apples and oranges, but the STAR 50 China, which is their version of is down 40% this year. We do have interesting markets that are out of sync here for AI. Right? Because China is just as gang gangbusters in its own way, but it is interesting that that one's down 40. Different market, weird liquidity while ours is on fire. [00:22:59] S1: Speaking of China being on fire, DeepSeek raises about $15,000,000,000, largest ever private Chinese round, by the way. Lodged investors, battery maker, don't I know how to pronounce it, and Tencent. Anything of note here? [00:23:13] S0: I think that the the Chinese open weight models are pretty much over in The US. I think it's the beginning of the end. DeepSeek, it's great that it raised this, but it's beginning to be banned across all federal agencies. And there was a horrific thing that happened this week that was over sensationalized, which was this Cohere Quinn thing. I don't know [00:23:30] S2: if you [00:23:30] S0: guys It's saw pretty terrible, but it's terrible on a number of Can you explain it as bad as it looks? [00:23:35] S1: Explain. What happened, Jason, for people who don't know?