Unsupervised Learning with Jacob Effron
00:39:18 · Erik Bernhardsson
[00:39:18] S1: I think they're all quite similar, but all... I mean, they're like snowflakes, unique in their own way. Robotics is gonna be a lot of it on on device, of course. So that's a big difference. And and, you know, I I don't sort of envision, like, we're gonna support, you know, most of what robotics looks like because a lot of it is gonna be on the devices themselves. But I think we're gonna be able to support a lot of the testing and development and training of the... Of robotics and and a lot of the simulation environments. So that's something I'm very excited about. On on the multimodal stuff, I mean, there's audio and music and image and stuff like that. Like, people don't talk about as much, but that keeps growing like crazy too. I I feel like LMs have kinda dominated the the airspace in the last few years, but I... I'm just incredibly, you know, excited about all the different applications. Like, why are, like, voice assistants so bad in 2026? Like, I don't get it. Like, they're just horrible. Like, I have a Google Home, and and, like, every question, it just ungulates. It does not understand what I'm... Like, you know, so I just go to ChatGPT. Like, why can't you just connect all of it, like, end to end and train, like, a a system so that that that can, you know, do, like, speech to speech? I I I think there's a lot of... We... We're gonna see a lot of sort of incredibly cool applications in that space. I always think about, you you look back like, know, four years ago, three years ago, whatever, know, could you have a guess that like things like Instinct or Sumo or like Cognition or like none of those things like are very easy to guess, like, you know, three years ago. So I kind of feel like also, like, if you look down the road, like, three years, like, most people don't have an idea of, like, what the world is gonna look like in three years. It's so hard to to know. But, like, what I do know is, like, kinda judging by the past three years, it's gonna be, like, there's gonna be some really cool applications. I just don't know what it's gonna be, but they're gonna be very cool. And hopefully, they'll use modal.
00:41:04 · Patrick Chase, Erik Bernhardsson
[00:41:04] S2: I was looking back at an email you sent me with the modal series a pitch deck, and this is what you said. This was after we had signed a term sheet. By the way, we never actually reviewed a modal deck. But here's something we made earlier that I just updated with the latest numbers. Could be good to review at some point. When you sent this, you were at roughly $2,000,000 in run rate. You now you've crossed $1,000,000,000 run rate, which is insane, in three years. What's been the biggest kind of change to supporting that kind of scale in just, you know, a couple years? [00:41:38] S1: So so first of all, I I actually realized, like, the other day, I I said on on another podcast that I've never made a pitch deck. And then I was actually thinking about it. I was like, maybe I did make a pitch deck after the series a because we had a couple of angels that came in, and they were asking about it. So I was like, oh, fine. I guess I'll put something together. So I I I I realized I did lie. Like, I did make a pitch deck, but it was after they rolled it across [00:41:59] S2: the showed it to us, so I don't know that it counts.
00:41:59 · Patrick Chase, Erik Bernhardsson, Jacob Effron
[00:41:59] S2: the showed it to us, so I don't know that it counts. [00:42:01] S1: Yeah. So I don't know if it counts. Like, I never, like, sent a pitch deck to an investor. Sent it to few angels, actually. But that... And that's the only pitch deck I've ever made, actually. But in terms of the scale, yeah, I mean, we're we're grown, you know, 100 x, I guess, in terms of revenue, something like that since then over the last three years. So a lot of growth. I think I think in a way, like... I don't know. Maybe I'm, just... You know, my my experience has mostly been at hyperscale startups. Like, I was a Spotify for seven years and some other places. So so so for me, like, this, like, fast growth is kind of all I've seen. Like, you know, this, like, you know, every every six months, you have to rewrite all the systems. You have to kind of rethink everything you're doing. You have to kind of change all the processes. Like, you always feel like you're behind. Like, I don't know. I I kinda like the mask. [00:42:51] S0: I guess we would love to, you know, since since we have your your mind on the podcast, we'd love to kinda zoom out, maybe talk a little bit about the broader info market and some things that have been in the news of late. You know, maybe maybe most top of mind these last few weeks, I feel like there's been tons of discourse about neo clouds. Right? They like, you know, how the debt's trading, they've traded down, they're kinda back up a little bit now. And I'm curious, like, what do you think happens to this landscape over time?
00:43:12 · Erik Bernhardsson
[00:43:12] S1: I think the neo clouts are, like, fine business models. Like, I I I think people have been, like, confusing it, like, a little bit. They're like, wow. There's so much demand. Like, revenue's gonna grow, like, so fast. And and then, you know, there's a little bit of sort of a... Almost like a VC mindset of, like, oh, like, thinking in, like, revenue multiples. But but I think all of these, like, these NeoClouds, like, growth is actually quite expensive for them because they have to go and raise a lot of debt. So And I I don't know if necessarily, like, you know, just because, like, they grow a lot, like, you know, like, it's very, capital inefficient. Like, these companies are at at their core, like, you know, financing vehicles. Like, they're very... Like, they're doing leasing, like, of hard assets, And and that's, you know, and that's like a... Inherently, you know, harder to scale the capital. Now that that market is kinda saying, woah. We deployed a lot of capital into NeoCloud. It's like, maybe maybe hold on for a second. Like, you know, we don't have that much more capital to lend, and so the interest rate is starting to go up. But... Yeah. Also, by the way, like, these companies have incredibly high leverage. So so, of course, they're gonna have more volatility. Like, the the the residual equity value is gonna go up and down much faster on the stock market with GPU prices and stuff like that. But they're, like, fine business models. Like, you know, they kinda locked in customer contracts and raised debt against it, and, like, you know, now they're paying off that debt. And and and in many cases, it turns out the residual value has been higher than people expected. Life time of GPUs has been longer than people expected. So they can resell once they paid it off, like, at a higher price than people thought. So, like, they're gonna make a bunch of money from that. Like, it takes a few years to get there. But I think in that sense, like, Neoclass will do well. Not particularly differentiated. So I I I... You know, long term, I think they're gonna start
00:44:47 · Jacob Effron, Erik Bernhardsson
[00:44:47] S0: work with a lot of them. Like, is is there any differentiation you see? [00:44:51] S1: I mean, it's, like, a little bit, but, like, at its core, it's, like, you know, like, relatively undifferentiated space. So I I I mean, my view is, like, you know... I mean, Elon was, like, tweeting the other day, like, all of your clothes are gonna die. Like, I I think that's kinda bullshit. I I do think Elon had a point when, like, basically, like, when he implicitly was saying, like, SpaceX has a much lower cost of capital. I don't think there's a coincidence. And if you look at the, like, the the three successful hyperscalers, Amazon, Azure, or AWS, Azure, and and GCP, that they're all attached to companies that had very solid cash flow, and they're all public companies that that had very low cost of capital. Because that at its core is is... Makes the life a lot easier if you wanna build something that's very capital efficient... Capital intensive. So I I I think in general, like, that is something that Neoclass will struggle with. Like, they have... You know, they they... They're gonna have a high cost of capital, and and it's gonna be hard for them to grow fast because of that. So so we'll we'll see about the market, but they're, like, decent business models. Like, I I think there might be an opportunity to buy the dip. I don't know.
00:45:54 · Patrick Chase, Erik Bernhardsson, Jacob Effron
[00:45:54] S2: You had an interesting tweet that was a lot of the the NeoLabs could become NeoClouds, you know, if their their model doesn't work out, but they have locked in these contracts. I definitely could see the the world going that way if, you know, if you have valuable compute that continues to appreciate because there's so much demand. But Yeah. [00:46:12] S1: I mean, Mistral kind of did that. Right? And, you know, like, it seems to be fine. I I think a lot of people are making these, like, very large buying decisions, and they kinda rationalize it. Like, they're like, well, if you don't need the GPUs, we can just resell them. Right? Like, that's almost like a form of insurance. And and you have to, you know, assume that with, like, all these NeoLab... You know, there's so many NeoLabs out there that have each raised 1,000,000,000... They always write... Raise exactly $1,000,000,000 for some reason. I don't know why. I guess they like that number. And and then buying GPUs. [00:46:39] S0: Very precise financial modeling that points Yeah. Yeah. Yeah.