Latent Space: The AI Engineer Podcast
00:01:54 · Jamin Ball, Shawn Wang
[00:01:54] S0: Yeah. The the idea was, hey. How can I provide some commentary on metrics around software companies and, you know, the the universe of companies that that typically has public metrics or public companies as a as a way to kinda? Not guide, but provide a blueprint to early stage companies and founders of like, hey. Here are some of the metrics required to be public one day. Yeah. And so there's lots of tables and charts and graphs on public metrics and valuation multiples. And maybe three, four years ago, I I kinda started writing a little ramble upfront, which is more of a... I kinda treat it as a personal journal. Like, what's on my mind? What what have I been thinking about? What's what what... What's top of mind? And, you know, that'll range from anything from, you know, some macro commentary to market commentary to, you know, trends in AI or what... You know, what... Whatever's trending at the moment. [00:02:43] S1: Yeah. I think every generation, there's kind of a VC blogger who's, like, sort of the guy to cover what's going on. It used to be Fred Wilson, you know, if you're back in the day. He used to write AVC, I think. Yeah. And then more recent... Like, Tomas Tunguz. Yeah. I mean, he's still active, but, like, I feel like you are the king of, like, charts and public stocks right now. [00:03:03] S0: No. I appreciate it. I mean, Tomas was a huge inspiration. So [00:03:05] S1: I Right. [00:03:05] S0: I was at Redpoint for for quite some time with Tomas, and, you know, I buy
00:03:05 · Jamin Ball, Shawn Wang
[00:03:05] S0: I was at Redpoint for for quite some time with Tomas, and, you know, I buy [00:03:09] S1: all this. And now now you started theory. Exactly. And then... Yes. Exactly. But is Redpoint okay? You guys are all leaving? [00:03:14] S0: Said No. Redpoint's great. They're they're they're great. I mean, I owe everything I learned to to those guys, and I I have a ton of respect for them. [00:03:20] S1: Yeah. Yeah. Amazing. Okay. So we're gonna get right into Anthropic, and you have a a sort of some spiel. You've had some public dust ups with people that we won't name. People are just generally very confused because they... A lot of them have never... A lot of our audience are engineers and researchers. Yeah. They've never seen an s one. Yeah. They... They've never been through an IPO process. They don't know what a roadshow is. They don't know how this is done. Mhmm. But more importantly than that, just the... That's the mechanics. Yeah. More importantly than that, what does it mean about our general state of AI? Right? Yeah. This is the most visibility we've ever gotten into Anthropic. [00:03:53] S0: Yes. Yes. [00:03:54] S1: And, like, well, now we know a lot more things than we used to.
00:03:54 · Shawn Wang, Jamin Ball
[00:03:54] S1: And, like, well, now we know a lot more things than we used to. [00:03:57] S0: Yeah. Totally. Totally. And just just to say up... Say it upfront, because I've been asked to say this. So these are... I work for Altimeter. We have a big position in Anthropic. Everything I say is... You know, these are all my personal views versus versus versus my firm views. But, yeah, it's a big deal. I think, you know, the big labs, OpenAI, and Anthropic seems like every quarter their numbers leak, but it's a subset of the numbers. It's not it's not everything. And now we kinda get a full open kimono view of the financial profile of, you know, one of the most important and iconic companies maybe of our lifetime. And just kind of a a quick process process refresher. They'll file an s one, probably wait about fifteen days. There's usually a minimum until they'll start a roadshow. The roadshow is when they actually start and they pitch investors, IPO investors that, you know, travel across the country, across the world to pitch the IPO. That'll usually last a week and a half, and then it will start trading publicly. So we're probably looking at [00:04:50] S1: End November.
00:04:50 · Shawn Wang, Jamin Ball
[00:04:50] S1: End November. [00:04:51] S0: Yeah. Like mid end of November, you know, kind of fifteenth to twentieth, tenth to twentieth of November of of when it actually starts trading publicly. Yeah. Do people IPO past Thanksgiving? That's like a weird dead zone to You know, between Thanksgiving and Christmas is is kind of a dead zone. Yeah. I would say, you know, post Labor Day to Thanksgiving is generally a kind of like a hotbed time for companies to go public. People are around. People are engaged. And it's Anthropic. The reality is is I I think people would people would make time for it. [00:05:25] S1: Work for it though. [00:05:25] S0: Right? Yeah. Exactly. Exactly.
00:05:25 · Jamin Ball, Shawn Wang
[00:05:25] S0: Right? Yeah. Exactly. Exactly. [00:05:27] S1: Yeah. So... Okay. That... That's the normal mechanics. I I think... And and that's it. Right? So so off the top of your head, you know, people should understand that an s one is just a filing that you have to do. OpenAI has done theirs as well, confidentially, and then then then they go public. Yep. People have filed s ones and not IPO ed. That's right. Cerebras famously did that. That's right. And then they did it again. And it... It's just part of the routine process. And you have investor day, and you have whisper rumors and all these things. Right? So as someone who's... Unless you're literally a banker or fund manager, that's all you need to know, basically. Right? There's not... There's no... This is part of the process, and there's a lot of indication to try to make it a successful IPO. Yeah. Successful is a mixed or loaded word these these days because, typically, you'll hear things like IPO is so successful, the stock popped 50% Yeah. On the first day. That's actually potentially a failure if you're Bill Gurley. [00:06:21] S0: Yeah. Exactly. Exactly. [00:06:23] S1: Who is like, well, you could have got 50% more. [00:06:25] S0: Exactly. And, you know, and just just for the audience, what what that mechanism is is in an IPO, it's like a fundraise on steroids. You're gonna go out. You're gonna raise a bunch of money at a certain price. [00:06:34] S1: How much are they raising? Like, 20,000,000,000? [00:06:36] S0: I don't think that's been [00:06:37] S1: Okay.
00:06:37 · Shawn Wang, Jamin Ball
[00:06:37] S1: Okay. [00:06:37] S0: I don't think they've decided yet. I think the rumors are, like, 75 to 100,000,000,000. Fuck. It'll be a big raise. I mean, typically, what you used to see price. I I know. What you used to see in normal IPOs was companies would float about 10 to 15% of their company, which means, like, what you would sell into the IPO would be 10 to 15%. [00:06:55] S1: Yes. And there's an employee lockup and a bunch [00:06:56] S0: of Exactly. Now it's maybe as as the companies get bigger and bigger and bigger, they might float less of the company because, hey, you can take less dilution. It's no different than a company raising a series a, b, or c. It's you're gonna raise money at a certain dilution. And, yeah, the Bill Gurley thing is, well, if the stock pops 50% on day one, why wouldn't you have just raised money at a higher price? [00:07:18] S1: Yeah. Right. [00:07:18] S0: You can take it on take it on less dilution. [00:07:20] S1: And that's a whole separate topic. Yeah. [00:07:23] S0: We've got lots of nuance to public markets and IPO [00:07:26] S1: allocation There's on conflicting incentives, and then there's the there's the chance that you actually... You don't pop. Yes. So all that, let's put it at a high level. Why now? Why IPO now? Right? Mhmm. They they could do a Stripe. They could do a Databricks. Yeah. Right? Yeah. They're not. They're IPO ing. Why?