We’re back on 20VC, with Harry, Rory from Scale and SaaStr’s Jason Lemkin. On on Figma’s IPO, the AI transformation deadline, and why most B2B companies are already too late.
The Bottom Line Up Front
Jason’s Rule: “If you haven’t grown because of AI, you’ve failed.” After 18 months since ChatGPT launched, if your B2B company hasn’t re-accelerated growth through AI by June 30th, 2025, you’re likely irrelevant. Oracle did it. Intercom did it. If you’re still “working on it,” you’re already dying.
Rory’s Reality: “Large amounts of money don’t change people as much as they reveal what they really are.” The AI investment boom ($300-400B annually) may not yield economically rational returns, and we’re seeing the inevitable outcome of fewer, bigger winners reshaping venture entirely.
Harry’s Humility: “I think we overestimate our ability to predict our winners.” None of his Fund I predicted winners became actual fund returners, fundamentally challenging reserve allocation models and forcing brutal honesty about early-stage investing.
Figma’s Phenomenal IPO Numbers
The episode opens with Figma’s S-1 filing revealing truly impressive metrics:
- $821M revenue (46% YoY growth)
- $1.5B cash, no debt
- 40%+ free cash flow margins
- Rule of 80+ (growth rate + margins)
Rory’s take: “This is just games to figure out what the model is going to be – $20B, $25B, or $30B?” The company is clearly tracking toward a billion-dollar revenue run rate with exceptional unit economics.
The Adobe Acquisition That Got Away
Remember when everyone mocked Adobe for “overpaying” at $20B? Fast forward to today’s likely $25-30B IPO valuation, and Scott Belsky looks prescient.
Key insight: Adobe should have been patient and paid “two years ahead” for a winner. The synergies would have made it a stellar deal, especially given Figma’s expansion beyond designers – 30% of users are now developers.
Jason’s brutal assessment: “Scott Belsky’s gone now [Adobe’s ex-CPO]. It’s always weird when you do M&A and it’s driven by an SVP or other non-founder, because there’s a good chance you outlast them as a founder.”
The Venture Partner Orphan Problem
The conversation reveals a critical issue plaguing venture today: partner turnover orphaning portfolio companies.
The problem: When your champion leaves the firm, “your ability to get something done in that venture firm goes down.” Even if they keep their board seat, they’re “useless” because they’re no longer “in the room where the money is allocated.”
Jason’s solution: Some firms have different partners make reserve decisions to avoid emotional attachment to underperforming investments. But this creates its own problems – the new decision-maker lacks historical context.
Reserve Allocation Reality Check
Harry’s brutal honesty: Looking at his Fund I, “none of the five I had as fund returners are actual fund returners, and the five that will be, I never had as fund returners.”
This challenges the entire reserve model at seed/Series A stages. When you can’t predict winners, you end up allocating reserves to “fastest growing companies” – essentially “triple digits growth, double digits per month. That’s it. What do they do again? SaaS for haircuts? I’m in.”
Index’s $3.5B Liquidity Bonanza
Between Figma and Scale, Index is returning $3.5B to LPs in a compressed timeframe. This exemplifies the “fewer, bigger winners” trend reshaping venture returns.
Rory’s observation: “Instead of getting $400-500M, you’re returning $2B+. It’s the inevitable outcome of concentration and longer holding periods.”
The new math: Only firms like Founders Fund and Index are achieving 3x DPI on large fund sizes. For LPs, if you’re in Kleiner, Index, and Sequoia, “you’re getting a lot of money back.”
Melio’s “Discouraging” $2.5B Exit
Despite Harry calling it “encouraging,” Jason found Melio’s acquisition “discouraging”:
- $153M ARR with a trailing 127% CAGR (!)
- Sold for $2.5B (13-14x revenue)
- Why sell at that growth rate?
The deal reveals the messy reality of 2021 vintage investing. Melio had raised at a $4.5B valuation with a ~$600m+ preference stack. Late-stage investors were happy to get 1x back.
Key insight: This creates “weird dynamics” on boards – some investors are “blankly indifferent” while early investors and founders care deeply about the difference between $1.5B and $2B.
Jason’s liberating perspective: “No one who wrote a check in 2021 at $4B is going to stop a 1x exit. They’ll be grateful to get their money back.”
The AI Transformation Deadline: June 30th, 2025
Jason’s Harsh Reality
“My rule is if you haven’t grown because of AI yet, you’ve failed. You had 18 months since ChatGPT launched to do this. If you didn’t get it done in these 18-20 months, be honest about if you ever will.”
Examples of success:
- Intercom: Genuine re-acceleration through AI
- Vlex: 25-year-old Spanish legal company became AI-relevant, acquired by Clio for $1B
- Oracle: “0 to $50M in 12 months” – if Oracle can become AI-native, what’s your excuse?
The AI Native Advantage
Harry’s portfolio includes a company that will exceed Superhuman’s revenue in 9 months – what took Superhuman 8 years to build. “The benefits and tailwinds from being AI-first versus layering on is massive.”
The brutal math: With growth rates flat across 300+ B2B companies despite AI investment, it’s net-zero sum. “If you haven’t pulled yourself out by now, you might be utterly irrelevant.”
The $300-400B AI Investment Question
Rory’s heretical question: “Will you get the ROI? Will it be an economically rational decision when you look back 2-3 years from now?”
The staggering CapEx investment ($300-400B annually) is turning “Warren Buffett’s idea of a dream business into a cash incineration machine.”
Two definitions of “economically rational”:
- Boring accountant logic: Positive NPV
- Game theory logic: “I got to show up at the party with AGI. Otherwise I won’t get invited.”
Meta’s $100M talent acquisitions: Will concentrated wealth ($100M packages) demotivate AI researchers? As Rory notes, “large amounts of money reveal what you really want to do.”
The Death of Mid-Market SaaS
The 9-Figure Zombie Problem
Hundreds of companies stuck at $100-200M ARR with mediocre growth have “nowhere to go.” They’re:
- Too small for IPOs in the new market
- Too expensive for PE at current multiples
- Struggling to find strategic buyers
Jason’s portfolio reality: Two companies got “mediocre M&A offers” recently. When asked about PE interest: “No one’s contacted them. Like, ever.”
Constellation Software’s 2X Model
The roll-up company openly advertises “2X revenue” acquisitions. Their SaaStr presentation was essentially titled “2X. Who wants 2X? Show up 2 p.m. on the West Lawn.”
The cruel math: Everyone’s rationalized away 2021 valuations, but sellers want 5x-6x while low-end buyers like Constellation still think assets are only worth 2x.
Scale’s Acquisition Creates a Data Gold Rush
Meta’s Scale acquisition has “allocated out” roughly $1B in revenue to competitors like Surge AI, which quietly built to $1B revenue with a one-page website and no VC funding.
Surge’s badass minimalism: “The quality of your data determines the ceiling of your ambitions.” Four paragraphs. That’s it. When you only have seven desperate customers each spending $100M+, you don’t need sales and marketing.
Edwin C’s founder story: “Founded in 2020, quietly gets to a billion” while everyone obsessed over Scale’s $14B+ pay out.
The Great Founder Exodus of 2025
CEO Turnover Hits Records
- 2,221 CEOs quit last year (up 24%)
- LaunchDarkly CEO quits to run Asana
- Cursor raising at $28B valuation
The exhaustion factor: What looked like a “4-6 year journey” became “12-13 years.” For founders, that’s potentially half their working life before an exit.
Rory’s empathy: “Sometimes you have to re-incentivize founders. Sometimes you have to accept that a transition is appropriate.”
Winner-Take-Most Economics
The extreme concentration at the top creates “weird deal hopping.” When only 0.0000001% outcomes matter, even being 10th doesn’t look as good as being 5th.
The PGA analogy: Win the tournament, get $5M. Finish 20th-50th, you’re “barely scraping along covering expenses.”
Key Takeaways for B2B Leaders
1. The AI Deadline Has Passed
If you’re still “working on AI strategy” in late 2025, you’ve missed the window. Oracle figured it out. Intercom figured it out. You had 18 months. More here.
2. Reserve Allocation is Broken
You can’t predict winners at early stages. Harry’s fund returners weren’t his predicted winners, and vice versa. This challenges fundamental VC math.
3. Exit Expectations Need Reality Checking
For 9-figure revenue companies with mediocre growth, 2x-5x outcomes may be the new normal. The days of 10x+ exits for everything are over.
4. LP Math is Unforgiving
LPs “know the exact amounts of how all this capital has to play out.” They understand the risks and the need for huge outcomes. No one’s getting fooled by vanity metrics.
5. Founder Mental Health Matters
The journey is longer and harder than expected. Having honest conversations about transitions, incentives, and burnout isn’t weakness – it’s strategic planning.
The Most Quotable Moments
Jason on AI urgency: “If Oracle can get AI native by June 30th and your startup can’t, I mean, I’ll smile, but I’d give up.”
Rory on big money: “Large amounts of money don’t change people as much as they reveal what they really are.”
Harry on fund returners: “I think we overestimate our ability to predict our winners.”
Jason on Atherton mansions: “The massive pad in Atherton is like almost 100% correlation to decline in revenue.”
This breakdown captures the brutal honesty and practical insights that make Jason, Harry, and Rory’s conversation essential listening for anyone in B2B SaaS. The AI transformation window has closed, the math on exits has changed, and only the brutally honest will survive the next phase of the market.
