Jan 22, 2026 · 1h 23m · news
Elon Musk vs Sam Altman | The Implosion of Thinking Machines | Can VC Survive Public Pricing? · 20VC with Harry Stebbings
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This episode of the 20VC podcast features host Harry Stebbings alongside venture capital experts Jason Lemkin and Rory O'Driscoll to analyze the existential challenges facing traditional SaaS valuations, the high-profile legal battle between Elon Musk and OpenAI, and the disruptive economic shift toward AI monetization and talent acquisition.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 9% of the talking time here. How this is scored →
Harry as informed peer 3.8 Guest teaching 5.5 Guest disagreement 3.3 Harry pushing back 3.0
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 1:18:53 Rory refutes Harry's Series A/B claim
Rory forcefully pushes back on Harry's assertion that Series A and B investing is a dummy's game, citing financial market equilibrium principles.
Hardest push from Harry ▶ 10:05 Harry refuses Rory's growth rate framingHarry directly interrupts and pushes back against Rory, arguing that 75 to 100 percent growth is insufficient for top-tier funds given current AI market benchmarks.
Biggest teaching moment ▶ 1:05:40 Rory breaks down OLAP database architecturesRory delivers a comprehensive historical and technical lesson on OLAP vs OLTP databases to justify ClickHouse's valuation relative to Databricks and Snowflake.
Harry holds his own ▶ 58:32 Harry defends Peak against SEMrush M&A logicHarry uses deep knowledge of his portfolio company Peak to challenge Adobe's acquisition of SEMrush at 4x revenue.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Can the Venture Model Survive Public Multiples? | 5 | 6 | 4 | 4 | Harry opens by citing public market pullbacks across Figma, Datadog, Monday, and PagerDuty to question the viability of the venture model. Rory immediately counters Harry's premise, explaining that public markets are simply sifting high growth from slowing growth rather than dooming tech. | |
| Is Venture Capital a "Scam" of Valuation Magic? | 2 | 7 | 5 | 1 | Jason provocatively calls venture capital a scam built on converting high multiples into cash before free cash flow exists. Rory rejects the scam label and educates the room on power-law dynamics, historical platform shifts like Borland and VisiCalc, and why pricing baskets of potential winners is rational. | |
| What Should 50M+ Non-AI SaaS Founders Do? | 4 | 5 | 5 | 4 | Harry asks what non-AI SaaS founders generating 50M-75M revenue should do. Rory tells Harry his premise is overly pessimistic and points out Harry's visible facial expression of disagreement on camera. | |
| Attaching Legacy SaaS to AI Tailwinds | 6 | 6 | 5 | 7 | Harry explicitly pushes back against Rory, asserting that 75-100% growth is inadequate for tier-one funds when companies like 11 Labs exist. Rory breaks down the clear distinction between founder wealth outcomes and VC return hurdles, urging founders to run capital-efficient businesses. | |
| Analyzing the Implosion of Thinking Machines | 4 | 4 | 2 | 2 | Harry sets up the discussion on executive departures at Thinking Machines. Jason re-frames the situation as a standard seed-stage failure with extra zeroes, which Rory heartily endorses. | |
| Downside Protection and Capital Recycling | 3 | 6 | 1 | 1 | Harry asks how investors manage downside protection in failing mega-seed deals. Rory explains redemption clauses, capital recycling within fund cycles, and why taking an early 20 percent haircut to reallocate capital is optimal. | |
| The Unforgiving War for S-Tier AI Talent | 5 | 3 | 2 | 2 | Jason details how top AI researchers care more about intellectual challenges than compensation packages. Harry brings up valuation downside protections and points out Yann LeCun's localized monopoly on French AI talent. | |
| Sam Altman vs. Elon Musk: The Fraud Claim | 3 | 6 | 2 | 2 | Harry transitions to the legal battle between Elon Musk and Sam Altman. Rory delivers a detailed breakdown of the legal mechanics, non-profit conversion history, and Musk's aggressive 100 billion dollar damages claim. | |
| Asymmetric Warfare and the Pain of Discovery | 3 | 5 | 3 | 3 | Harry asks if Musk's lawsuit is primarily meant to slow OpenAI down. Rory explains asymmetric legal warfare and highlights the reputational damage caused by embarrassing deposition disclosures like Greg Brockman's diary. | |
| Stripe Hauntings and the Social Network Sequel | 3 | 4 | 3 | 2 | Harry asks who wins the legal dispute. Jason predicts Elon wins regardless of court rulings and compares the drama to a sequel of The Social Network, theorizing Greg Brockman was haunted by leaving equity behind at Stripe. | |
| Billionaire Revenge: Peter Thiel vs. Gawker Style | 2 | 5 | 3 | 1 | Rory analyzes jury trial dynamics and compares Musk's strategy to Peter Thiel's bankrolling of the Gawker litigation. Jason adds that Musk's primary goal is dragging every uncomfortable fact about Sam Altman into the public eye. | |
| To Settle or Not to Settle? | 5 | 5 | 4 | 6 | Harry challenges the guests by asking why OpenAI wouldn't simply settle to avoid distraction, pointing out that competitors like Dario at Anthropic benefit from the fallout. Rory separates operational litigation management from core commercial execution. | |
| Ads in ChatGPT: Inevitable Monetization | 4 | 6 | 3 | 5 | Harry asks if introducing ads into ChatGPT risks degrading user experience while Gemini is gaining consumer ground. Rory explains that low free-to-paid conversion rates make ad monetization an economic necessity. | |
| Why LLMs Will Dominate Product Discovery | 2 | 5 | 2 | 1 | Jason argues that search ads inside LLMs will enhance user experience for product discovery. Rory agrees, contrasting targeted LLM ad auctions with bloated search engine ad clutter. | |
| Threatening Google's Search Cash Cow | 4 | 5 | 2 | 2 | Harry asks whether search ad revenue inside ChatGPT could become a billion-dollar business within a single quarter. Rory and Jason discuss how LLMs directly threaten Google's 240 billion dollar search cash cow. | |
| The Monetization Potential of OpenAI's Search | 2 | 4 | 2 | 1 | Jason shares a calculation from Gemini showing that 25 billion dollars in search revenue requires only 0.22 monetized ads per prompt at a 50 dollar CPM. Rory shares a personal story about using ChatGPT to buy a TV to demonstrate high-intent discovery. | |
| Answer Engine Optimization and Adobe's Strategic Acquisitions | 5 | 7 | 5 | 6 | Harry asks why Adobe acquired SEMrush instead of buying a smaller AI-native company like Peak. Jason and Rory explain enterprise M&A dynamics, noting big public acquirers require established revenue scale rather than early-stage technology. | |
| ClickHouse and the Rise of OLAP Database Architectures | 4 | 8 | 2 | 2 | Harry introduces ClickHouse's 15 billion dollar valuation. Rory provides a deep technical explanation of OLAP versus transactional database architectures, comparing ClickHouse's market opportunity to Snowflake and Databricks. | |
| The Evolution of Late-Stage Venture Capital Dynamics | 4 | 6 | 3 | 2 | Harry asks if Sequoia backing both Anthropic and OpenAI signals the end of competitive conflict rules. Rory clarifies that late-stage mega-rounds function like public market asset management where small ownership percentages carry no board seats or information conflicts. | |
| The Risk-Return Curve and Private Market Growth | 6 | 7 | 7 | 7 | Harry claims that investing in competitive Series A and B rounds is a dummy's game compared to pre-seed or late-stage rounds. Rory strongly rejects Harry's thesis, explaining that risk-return curves naturally balance across stages over long time horizons. |
Statements from this episode (47)
O'Driscoll: Musk-Altman Lawsuit Will Be an Ongoing Public Spectacle
“It's going to be the gift that keeps on giving. If you're the kind of person who slows down at a traffic accident, in other words, if you're like, 90% of humanity, you're gonna be slowing down every time the depots come out.”
Lemkin: Venture Capital Operates Like a Scam Converting Unearned Multiples to Cash
“In some ways, I feel like venture and tech is a bit of a scam. Our job is to convert Very high revenue multiples into cash almost unnaturally. Through M&A, through public offerings, when they haven't earned it in free cash flow.”
O'Driscoll: Venture Capital Model Is Legitimate Despite Converting High Multiples
“You described the system correctly, but you kind of imply it's called a scam. I don't think it is a scam.”
O'Driscoll: Elon Musk enjoys asymmetric win-win situation against OpenAI
“Elon's in an asymmetric win-win situation, and OpenAI is not.”
Rory O'Driscoll: Palantir trades at 70x forward sales with 45% growth
“You could have also cited, at Palantir, at 70 times forward sales, right, for a 45% grower”
Lemkin: Almost no software unicorns are better than Figma
“None of the unicorns are better than Figma, almost none of the prior, and if Figma isn't good enough, it's not good enough.”
O'Driscoll: Figma trades at 10x forward sales with over 30% growth
“It's still a twelve billion dollar market cap company. It's still growing. Yeah, it's still trading at 10 times forward sales, growing at 30% plus.”
O'Driscoll: Software Stocks Face Long Flat Periods Transitioning to Cash Flow
“It's a long journey from the hope and the sizzle of a revenue, a forward revenue multiple at a high growth rate. To the steady anchor of, you know, 12 times free cash flow. It's a long and tedious journey. And there's a long flat period for the stock while tha…”
Rory O'Driscoll: VCs Can No Longer Finance $100M Revenue SaaS Companies
“Your a hundred million dollar revenue SaaS company is an awesome entrepreneurial achievement. You are to be hugely congratulated. It's magnificent. It's just not something that we can properly finance. Because we're just not going to make a public market ventu…”
O'Driscoll: Non-AI SaaS Startups Growing 75%+ at $50M ARR Are Fine
“Like, I think the truth is, if you're going 75 to a hundred percent, you're fine. Stop. You know, like, this idea, like, because if you're going, look, if you're going a hundred percent at 50, you're going to be at a hundred, then your growth decays to 80, you…”
Lemkin: Has Not Acquired a 20% Startup Ownership Stake in Seven Years
“I haven't bought 20% of a startup in like seven years. So, and I haven't done around at a million in revenue growing quickly in the teens in a decade.”
Lemkin: RevenueCat Tripled Developer Count in Final Months of 2025
“I think they tripled the number of developers on their platform in the last four months or three to four months of the year.”
Lemkin: Decade-Old Portfolio SaaS Will More Than Double Revenue in 2026
“They will more than double this year after a decade of like, 10% a year growth, 20% being pretty good.”
Lemkin: Existing SaaS Founders Have No Excuse for Lagging in AI
“There's no excuse. We all use the same LLMs. There is no excuse for you to not have an agent as good as the new kids.”
O'Driscoll: Mid-stage SaaS re-acceleration probability is virtually zero
“The probability of a mid-state SaaS company exploding into something amazing is rounding error zero.”
O'Driscoll: Extraordinary growth has left SaaS for AI startups
“The kind of extraordinary growth has vanished from SaaS and has now reappeared in AI land.”
Lemkin: Will Never Invest in Technical Startups Lacking Technical CEOs
“I'm super skeptical of technical companies where the CEO isn't One of the greatest technical visionaries in the industry. I'm just, I'll never do that investment again. I'll never do an investment again where, where, where it's not like Databricks are better a…”
Lemkin: Top AI researchers prioritize project choice over financial compensation
“It's like the best researchers in AI, the best, the ones you need to win, they only want to work what they want to work on. And they will leave a lot of money behind.”
Lemkin: 99% of Software Companies Cannot Build Environments Top AI Talent Demands
“And folks want the smartest folks in AI, in, in applied math and others, they only want to work on the intellectual challenges they want to work on. And if you can't deliver that, And the right boss. There's so much portability that they will just leave. And t…”
O'Driscoll: Yann LeCun's $3B Non-LLM Venture Is A Scary, High-Risk Bet
“Now, Juan Lacoon raising, you know, money at three billion. And that's an example of I personally look at that and say, wow, that's a scary bet, because, you know, in somewhere between 2017 and 2022, we unlocked, collectively, the industry unlocked LLMs, and w…”
O'Driscoll: Musk and Altman Donated $30M+ and $10M to OpenAI
“You know, Elon shipped in thirty million plus, Sam Altman shipped in 10, Reid Hoffman.”
O'Driscoll: Musk Seeks $70B to $130B in OpenAI Equity Damages
“The damages claim is 70 to a hundred and thirty billion dollars, which would come in the form of extra shares of open AI to Elon and everyone else would have to take the dilution.”
O'Driscoll: OpenAI financings face 10-20% dilution risk from legal trial
“And I don't know how that impacts fundraising, but for the next one, two years, There's the potential of every financing of OpenAI now has you might have to take 1015, 20% dilution if they lose a jury trial.”
O'Driscoll: Musk's case against OpenAI rests on a slender conspiracy thread
“I think Elon's case is built on a slender conspiracy thread, but it'll sound compelling to a jury when you also have all this dirt about, you know, like, who the hell knows?”
Lemkin: Elon Musk Will Not Settle With OpenAI and Will Win
“They ain't going to settle for that. He's going to go to trial and he's going to win.”
O'Driscoll: Musk Is Wrong That OpenAI Was a Scheme to Cheat Donors
“So I think fundamentally, I think Elon's wrong on the core assertion. I don't think this was a cunning device to cheat everyone, because if they wanted to do that, they could have just done what Antropic did, which is the totally sensible interim stage of a pu…”
Lemkin: Musk Lawsuit Won't Impair OpenAI's Ability to Raise Capital
“I don't think it'll, this will make it any harder for them to raise capital because greed trumps fear”
O'Driscoll: OpenAI Is Structurally Less Risky Than Ever Before
“OpenAI, from a structure perspective, it's less risky now than it's ever been.”
O'Driscoll: Serving free ChatGPT users costs more than Google or Facebook
“And the cost to serve a free ChatGPT customer is higher than either Facebook or Google.”
O'Driscoll: Consumer free-to-paid conversion rates are under 5%
“The truth is consumer conversion tends to run well under five, yeah, 10%, probably five percent or less. You just don't get enough conversions to serve the free tier.”
O'Driscoll: Advertising is inevitable for ChatGPT to fund free users
“And the only way consumers get free stuff is if you want ads. So there's no choice. So I think it's kind of a, it's inevitable.”
Lemkin: Introducing Ads to ChatGPT Will Add Value to the Product
“I genuinely think there'll be, they'll add value to ChatGBT.”
Lemkin: Conducts Vendor Discovery on Claude Rather Than Google
“I do my vendor discovery on Claude and a little bit on Google. That's when I want to find a new tool or a new product, that's where I start. I start with LLMs”
Lemkin: Google Search Is Unusable and Useless for Product Discovery
“I mean, I find Google unusable for discovery, unusable today. It is all random. I can't look, I it's great to see vendors. I can't figure out which product to use or buy. Google's useless.”
Lemkin: LLMs will become the primary way consumers buy products
“I think we are way under discussing the power of discovery in LLMs. I think this is the way we will buy everything in the future as we are embedded in LLMs. Well, I don't know why I would use anything else other than the best of ChatGBT or Claude or Gemini to …”
O'Driscoll: Google Search ad dollars will shift to OpenAI
“Their cash cow, which kicks off 200 and forty-odd billion a year of revenue, which is the ads business, Isn't the best product on the market anymore, and some of those dollars will go to open AI, and because it's better real estate.”
O'Driscoll: All of Amazon's retail gross margin comes from ads
“Amazon ads, which has exploded from, you know, we don't talk about it because it's buried in the bigger business, but all the gross margin now comes from ads. The retail business, It's just an excuse to sell ads that makes all the margin, right? On the retail …”
O'Driscoll: Answer Engine Optimization (AEO) will be a major market
“The SEO, the AEO, the answer engine optimization Is going to be a vitally important business. All those companies are going to matter.”
Lemkin: Current Generative Engine Optimization (GEO) products are snake oil
“I agree with you that someone is going to build a massive business making, connecting these ads to the LMS. I'm not convinced it's from the snake oil that I have seen in the geo products that I have used today. I believe there's snake oil.”
O'Driscoll: OpenAI Will Capture All Ad-Buying Value Natively Without Ad-Tech
“So I think for the paid ads, all the value that's going to be captured is going to be captured by OpenAI, and there's not going to be a optimization engine.”
O'Driscoll: Adobe Acquired SEMrush to Launch an Answer Engine Optimization Product
“SEMrush, which is the king of search engine optimization for Google, got acquired recently by Adobe, and I think that acquisition only makes sense if their plan is as quickly as is humanly possible to introduce an answer engine optimization product, because th…”
Lemkin: ClickHouse originated as an in-house tool at Yandex
“ClickHouse is basically an in-house open source product built at Yandex, which is now Nibius, built in Russia.”
Rory O'Driscoll: Late-Stage VC Conflicts Don't Matter Without Board Seats
“And I think these late-stage investments, if you're not in the room, it doesn't matter because you don't have meaningful information rights. You're not getting the board deck. You're not there for the strategic stuff.”
O'Driscoll: Early-Stage Competitor Investing Is Blocked by Founders
“You couldn't do the Series A of OpenAI and do the Series A of Anthropic. That would be stupid. I would assume one of the CEOs would stop you.”
Stebbings: Competing in Series A and B Rounds Is a Dummy's Game
“The dummies game, I think, right now, is playing the super competitive series A, B's in venture, where we're paying up super early for little signs of product market fit in intensely competitive markets, a hundred X ARR. I'd way rather have 15, 20% of a pitch …”