Three Big Things This Week:
- Daniel Gross & Nat Friedman walked away from a $1.1B fund (already 4x’d) to join Meta – signaling the biggest talent war in Silicon Valley history
- “Triple-triple-double-double” SaaS growth is now boring – investors only want moon shots with 10% chances of $20B outcomes
- If you haven’t re-accelerated growth through AI by June 2025, you’re likely irrelevant (Oracle and Intercom did it, why haven’t you?)
Bottom Line Up Front
Jason’s Directness: “It will be the biggest issue of 2026, I think, in B2B AI is just the inability to recruit talent… If you think your answer is to go hire a VP of AI that wears a tie and is studying things like just shut the startup down.” The AI talent war will separate winners from losers more brutally than any previous technology cycle.
Rory’s Reality: “The truth is there’s a small number of things that are working really well, and everything else looks dull in comparison… So if you start to pull ahead, provided you continue to execute, it’s very hard to catch up.” Market dynamics now favor extreme concentration of success, making early leads nearly insurmountable.
Harry’s Honesty: “If you don’t want to embrace [AI], you are going to make this ship sink… If you need a week for rediscovery week, I promise you, you’re not going to work.” The AI adoption window has closed – adapt immediately or become irrelevant.
The venture capital and SaaS landscape is experiencing seismic shifts that will fundamentally reshape how companies compete, hire, and operate. In the latest episode of the 20VC podcast, three industry leaders dissected the most critical developments defining 2025’s market dynamics.
The Meta Acquisition That Changes Everything
The business world was stunned when Daniel Gross and Nat Friedman, two of Silicon Valley’s most respected figures, abandoned their $1.1 billion venture fund NFDG to join Meta. The mathematics behind this decision reveal the extraordinary economics reshaping the industry.
According to the podcast analysis, NFDG had deployed roughly $500 million of their fund and achieved a 4x return in just two years – generating approximately $1.5 billion in gains and $300 million in carried interest for the partners. Despite this stellar performance, Meta’s offer was compelling enough to walk away from an additional $1.5 billion in investable capital.
The Strategic Implications
This wasn’t just an acqui-hire; it represents Meta’s systematic approach to building an “AI talent magnet.” As Jason Lemkin noted, “The best want to work for the best… and the tough thing is they want to work for the prominent best in many cases.”
Meta’s strategy mirrors what worked at X (formerly Twitter) under Elon Musk – creating a “mega mecca for talent” that attracts top performers who refuse to settle for anything less than excellence. This approach is becoming essential because, as the speakers emphasized, struggling companies can’t attract great talent regardless of their growth metrics.
The Talent Crisis That’s Breaking B2B
Perhaps the most sobering discussion centered on the emerging talent crisis in B2B AI. The numbers are staggering: companies are now offering $800,000+ annual packages plus RSUs and guarantees to secure top AI engineering talent. One founder shared that he’s giving away 0.5-1% equity stakes to each AI engineer – unsustainable math at scale.
The Cursor Effect
The success of companies like Cursor is creating ripple effects throughout the industry. As one multi-billion dollar company founder told Lemkin, “My single biggest challenge today is cursor… they’re just paying insane amounts of money for everyone.”
This creates an existential question for SaaS companies: How do you compete when you can’t afford the talent war? The speakers identified several harsh realities:
- Geographic arbitrage is essential: Building centers of excellence outside Silicon Valley where “very good” talent can compete without requiring S-tier compensation
- AI-native teams have massive advantages: Companies with teams that naturally embrace AI will outperform those struggling with adoption
- Traditional sales roles are disappearing: Microsoft’s recent layoffs of 9,000 generalist salespeople in favor of solutions engineers signals a broader trend
The Death of “Triple, Triple, Double, Double”
One of the most fascinating discussions revealed how dramatically investor expectations have shifted. The traditional SaaS growth trajectory of “triple, triple, double, double” (tripling revenue for two years, then doubling for two years) is no longer exciting in today’s market.
Why Traditional SaaS Metrics Are Losing Their Luster
Rory O’Driscoll explained the new mathematics: “If there’s two games and one of them has that embedded 10% chance of amazing, like 20 billion, a cursor outcome, and one of them just doesn’t… there’s no price at which you’ll do it.”
This creates a painful reality for solid, profitable SaaS companies growing at 20-25% annually. They’re caught in a valley between:
- AI-powered companies with explosive growth potential
- Traditional businesses that can be acquired by private equity at 6-7x revenue multiples
The Toma Bravo acquisition of Olo (a profitable, $320M ARR company) for $2 billion at 6.5x revenue exemplifies this dynamic. It’s a “meat and potatoes deal” that provides decent returns but doesn’t generate life-changing wealth for investors.
Stock-Based Compensation: The Hidden Dilution Bomb
OpenAI’s revelation that stock-based compensation exceeded 119% of revenue last year highlights a critical issue facing high-growth companies. While the accounting can be misleading (based on 409A valuations rather than actual dilution), the trend signals dangerous territory for many startups.
The Churchill Principle
As Jason Lemkin eloquently put it: “No one ever said to Winston Churchill, did you bring World War Two in on budget? They just said, did you win World War II? When it becomes existential, you do what you have to do to win.”
This philosophy is driving companies to prioritize market dominance over financial efficiency, leading to unsustainable compensation inflation that will impact venture returns for years.
Strategic Moves in the New Landscape
CoreWeave’s Smart Capital Allocation
CoreWeave’s $9 billion acquisition of Core Scientific demonstrates sophisticated use of inflated stock prices. By converting rental expenses into equity dilution, they’ve reduced fixed costs while maintaining upside exposure to data center demand. This move shows how companies with high-multiple stocks can strategically de-risk their business models.
The AI Adoption Ultimatum
Canva’s “AI Discovery Week” – requiring all 5,000 employees to pause regular work and learn AI – represents a gentler approach to what many see as an inevitable reckoning. The speakers were divided on this approach:
- Supportive view: It provides notice and opportunity before making hard decisions
- Critical view: Employees curious and capable enough should have already embraced these tools
The underlying message is clear: companies can’t afford to carry employees who resist AI adoption.
Market Predictions and Risk Assessment
The podcast’s analysis of recession probabilities and market dynamics revealed sophisticated thinking about current risks:
- Recession probability: Roughly 15-20% chance by end of 2025, which represents normal baseline risk rather than elevated concern
- Meme stock sustainability: CoreWeave and Circle’s inflated valuations will likely face downward pressure unless fundamentals catch up
- PE market recovery: Early signs suggest private equity is returning to save struggling unicorns, but only for profitable companies with 20%+ growth
Implications for B2B Leaders
The discussion reveals several critical strategic imperatives:
1. Talent Strategy Revolution
- Accept higher equity dilution for AI-capable engineers
- Build centers of excellence in lower-cost markets
- Eliminate AI-resistant employees before they damage competitiveness
2. Valuation Reality Check
- Traditional SaaS multiples are compressing except for AI-enabled companies
- Growth at 20% is no longer sufficient without AI differentiation
- Profitability plus growth remains the only path to attractive exits
3. Competitive Positioning
- Vertical specialization becomes more important as horizontal solutions commoditize
- Technical depth beats relationship selling in the AI era
- Speed of execution matters more than perfect strategy
The Venture Capital Reckoning
Perhaps most sobering was the discussion of venture capital’s current challenges. Deal volume has hit an eight-year low while spectacular successes capture all attention and capital. This creates a “flight to consensus” where:
- A small number of AI companies receive massive funding
- Traditional B2B companies struggle to raise capital
- Venture returns face pressure from employee equity dilution
The speakers agreed that most VCs are spending their time managing disappointing portfolio companies from 2020-2021 that are growing at 10-30% rather than the explosive rates initially projected.
Looking Forward: The New Rules
The conversation painted a picture of an industry in transition, where traditional rules no longer apply:
- Talent is the new moat: Companies that can’t attract top AI talent will struggle to compete
- AI adoption is existential: Organizations must transform or face obsolescence
- Capital efficiency matters again: The days of growth-at-any-cost are ending for most companies
- Vertical focus beats horizontal breadth: Specialized solutions command premium valuations
- Speed beats perfection: First-mover advantages are becoming more pronounced and durable
The overarching theme is clear: we’re witnessing the emergence of a two-tier market where AI-enabled companies with top talent operate in a different league from traditional businesses. For SaaS leaders, the choice is stark – transform or risk irrelevance in an increasingly AI-driven world.
The Most Quotable Moments
Jason on talent reality: “I was with the founder this morning of a multi-billion dollar company… they said my single biggest challenge today is cursor… cursor’s just paying insane amounts of money for everyone.”
Harry on employee expectations: “If you need a discovery week for AI, you have people who aren’t curious enough to want to progress and running their job… I said you fire them.”
Rory on the Churchill principle: “No one ever said to Winston Churchill, did you bring World War Two in on budget? They just said, did you win World War II? When it becomes existential, you do what you have to do to win.”
Rory on recession probability: “Booms don’t die of old age… just because it’s been great for six or seven years doesn’t mean that it has to die in the eight.”
Companies that act decisively on talent, AI adoption, and strategic positioning will thrive, while those clinging to old playbooks risk being left behind in what promises to be the most transformative period in business software history.
