The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
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?
00:23:38 · Jason Lemkin
[00:23:38] S0: Well, listen, Cohere is now a fourth tier LLM, right? Fourth tier player that has only sovereignty on its side as near as I can tell. Harry, you're welcome to correct me, Rory, right? But it has sovereignty. And sovereignty is if you talk to anyone at the Enterprise, it's in the top five list. They found that over that Qwen, Alibaba's existing Qwen model was calling to Alibaba servers, both in China and in Singapore, pinging them and uploading data to them when it said it wasn't. When it said it wasn't doing that on the Internet. It's everybody's nightmare in The US that our data is being uploaded to China. Now, I think Cohere was more careful about how they did it, even though they're talking their own game. You can't really trust anybody in AI. They're all talking their own game because this is good for them. There's no evidence this is a backdoor like social media thought. Like this was built in. This is probably a training mistake at some level, but it doesn't matter. It doesn't matter if one out of 100,000 times your date, your confidential data is being uploaded to Chinese and Alibaba servers in Asia, in China, or in Singapore without your knowledge and without your consent when it's been directed not to. What CIO or CISO is going to approve this model? I can't imagine anyone would. If this keeps... And everything... This is... You know, it's just... It's a junk to Black October and all these cybersecurity issues. And if this happens multiple more times and Alibaba said nothing, you just lose your job if you use these models. You're just gonna lose your job. You're just gonna lose your job. So it's pretty crazy. And it could have been much, much worse. This got some press. I'm surprised it didn't even get more. It might be subtle, but, again, this is every... Everyone's nightmare using these open weight models based in China is that your data goes to China, it did.
00:25:24 · Harry Stebbings, Jason Lemkin, Rory O'Driscoll
[00:25:24] S1: So what happens to the stack when the Chinese open source market shrinks? What happens to the gateway providers, the routers, your open routers of the world? What happens to the inference providers that thrive in large part because of a variety of models, often Chinese, your models, your fireworks, your base tens. What happens to the stack if that Chinese model landscape shrinks? [00:25:47] S0: Well, what goes... As as Dev said when he was on the show, what goes up that quickly with developers can go down that quickly. We'll change in a week. [00:25:53] S2: There's going to be... There's some US open source options. Right? The question is, given what we've seen about the expense of building the compute expense that has taken Anthropic to build their model and the fact that 75% of that compute expense actually goes to building, training the model, it would be interesting to see how advanced a model a US company like NVIDIA can build and make available on an open source basis. If someone doesn't do it, then all you have is a closed source providers, and obviously their economic leverage goes way up. And you should buy even more Anthropic in the s one... In the IPO. [00:26:28] S0: I think it's bullish for Anthropic that this happens. Agree it's bullish. Absolutely. [00:26:31] S2: No. [00:26:32] S0: I think you'll know the moment Elon's able to get cursor off these models is it's a tipping point. If he could, he would. He just can't yet. [00:26:41] S1: Why? [00:26:42] S0: Because Grok isn't good enough. [00:26:43] S2: Yes.