The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
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.
00:26:43 · Rory O'Driscoll, Jason Lemkin, Harry Stebbings
[00:26:43] S2: Yes. [00:26:44] S0: And he already kicked OpenAI partially out. Right? But he can't yet because he's got this bet has to work, but the minute it can, and he said when he bought Cursor, part of the reason was he wanted that team's DNA to make Grok more competitive. Right? So there's multiple benefits here. Right? But there's some deep irony that a $60,000,000,000 core acquisitions running on China open source models primarily, it's not going to last, right? I mean, again, Salesforce forced Fin to rip out theirs before the acquisition closed. But Salesforce can tolerate a little bit more in Fin than Cursor can because Cursor's got to compete. It's in the most competitive space there is. Right. But as soon as he can rip it out, going to rip it out. Right. It can't run on Kimi forever. It's just it's just doesn't this is not it doesn't make any sense. If you think about it. It's a temporary [00:27:29] S1: It's it's not just, like, highly illogical. If you if you download and you run it locally, the security risks are limited to none. I understand that CIOs are CIOs. [00:27:38] S0: Limited to none when it's dialing China and uploading your data. And what if in... Instead of a a four zero four or whatever it was, there was a prompt injection sitting there? Very easy to do. And that prompt injection just uploaded your data. People that... This has been here for several iterations of the model.
00:27:38 · Jason Lemkin, Rory O'Driscoll
[00:27:38] S0: Limited to none when it's dialing China and uploading your data. And what if in... Instead of a a four zero four or whatever it was, there was a prompt injection sitting there? Very easy to do. And that prompt injection just uploaded your data. People that... This has been here for several iterations of the model. [00:27:52] S2: I think the question you wrestle with, Harry, is what can you know? How much can you know with 100% certainty as to what the model is doing? And then obviously separate from what the model does, you can try and to some extent, block it, sandbox it from... To prevent it doing that. But it's like having a recalcitrant and difficult employee who's actively trying to subvert you. Once that happens, your head hurts. If you had an intern and you knew that there was a risk that they would try and actively leak your guest list and your shows to your dreaded podcast competitor, it would just get in your head. But it gets to this whole question of what can you know about what the model is doing? And if you read the S-one for Anthropic again, one of the risks they say is basically the models will lie to you, the models will tell you they're not doing shit and they're doing it. So you get into this thing, what can you really know? And once you get to that point, it's really hard to, you do worry a lot about a Chinese sourced open source model. So there will be that pushback, I think.