AI coding tools may be undervalued, and Shopify v. Stripe
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High-skill immigration watch: The incoming Trump immigration team added South Dakota Gov. Kristi Noem to its roster. She follows roles filled by Stephen Miller and Tom Homan. The three are likely not the people you want in power if you were hoping for greater access to the nation for workers in demand. (Local coverage from India here.)
Cursor’s insane revenue growth
Late last week TechCrunch reported that Anysphere (~d/b/a as Cursor) is in the process of raising a round at a valuation that could reach $2.5 billion. Given that the company announced a $60 million Series A at what Crunchbase reports was a $400 million post-money valuation, you might think that the world has once again forgotten the lessons of 2021.
And yet. Here’s Marina Temkin:
[Cursor’s parent company Anysphere] has seen its revenue grow from $4 million annualized recurring revenue (ARR) in April to $4 million a month as of last month, according to a person with direct knowledge of the company’s financials. The company is experiencing faster user adoption and growth compared to other coding assistant providers, another person said.
$4 million worth of monthly revenue is a run rate of around $50 million, a figure that I think we can safely round to given that the company’s is growing as quickly as it is.
That means that Cursor is raising money today at a 50x revenue multiple. That’s expensive for a unicorn; you might not blink twice at a Seed round done at that multiple if it was growing at a few hundred percent per year. But a company that is one doubling away from IPO scale?
What’s notable is that Cursor is growing like a Seed-stage startup, just with a far larger revenue base. That’s why the company’s upcoming round is so exciting. You want to back lightning in a bottle as a venture capitalist, and revenue growth of >10x in under a year is contained electricity, triply so with a multi-million dollar revenue base to start with.
I don’t think that Cursor is about to be overvalued. In fact, if I was growing that quickly, I might demand an even higher price, depending on how much cash I was raising and the dilution that figure would represent.
If I was a major shareholder in a company that went from $4 million ARR to $50 million ARR in a few quarters? I would handcuff every bip of ownership I could to my body and never let them go.
Last thought here: AI-powered development tools are doing well as a cohort. Cursor is growing as quickly as it is, while GitHub’s own copilot keeps putting up big numbers. Sounds like product-market fit inside of a huge TAM, yeah? I smell multiple winners.
Shopify’s earnings impress
Shares of Shopify are up 15% this morning. Why? The company just crushed its third-quarter earnings: