The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:24:07 · Rory O'Driscoll, Jason Lemkin, Dev Ittycheria
[00:24:07] S0: Yeah. Some days you just make a... It was a mistake. He will probably look back and say, gosh, I wish I hadn't done that. It's weapon in the hands of everyone who competes with them. Wish it hadn't happened. A lot of what's going on here is what are the legal obligations versus what are the implied rules? And what are the consequences of breaking the implied rules? And what are the non legal, but nonetheless implied rules is it's really hard for venture firms when they do two directly competitive deals. And the only way you get around it is you make all this argument about you love your children equally, you don't say anything in public about one about the other, and then you have something like this that crashes through every wall. And it just shows that those situations of, you know, two directly competitive investments are very fraught, especially if you're actively involved in the companies. It was very unhelpful for Kohl's, very unhelpful for both companies. It's like, it was not venture's finest hour. Let's move on. You know? [00:24:58] S2: Maybe being the Pollyanna, he meant it positively as tough love. Struggling sec... You know, there's a theory. Like, harsh on the struggling... The most struggling founders. He thought struggling second tier competitor would be motivating. [00:25:11] S0: Yield obviously the dev and the CEO or man manager side here, but I do vaguely remember something about praise in public and chastise in [00:25:19] S2: It seems backwards, but... [00:25:21] S1: I think [00:25:21] S0: that was the mission here.
00:25:21 · Rory O'Driscoll, Jason Lemkin, Harry Stebbings
[00:25:21] S0: that was the mission here. [00:25:22] S2: Never know. It seems baffling. [00:25:24] S3: We've been talking a lot about open models over the last few weeks. We saw Reflectionship Beam. I thought that was a really interesting story. We also discussed, Rory, one of yours before Intercom, obviously selling to Salesforce. We had Salesforce buying Listen Labs too for $2,000,000,000. Of those two, where would you rather go? [00:25:43] S0: I think both are worth some time. I mean, I'd love to hear your thoughts on deflection because look, they've been frankly talking about shipping for a long time. And from what we said earlier, it seems to me that being an open weight US sourced model is a super interesting strategic position right now. So if someone can ship something that's near near frontier quality, even if it's six, twelve months off, just from the dynamics of the market, that's a nice place. So what are you guys thoughts, David?
00:25:43 · Rory O'Driscoll, Dev Ittycheria
[00:25:43] S0: I think both are worth some time. I mean, I'd love to hear your thoughts on deflection because look, they've been frankly talking about shipping for a long time. And from what we said earlier, it seems to me that being an open weight US sourced model is a super interesting strategic position right now. So if someone can ship something that's near near frontier quality, even if it's six, twelve months off, just from the dynamics of the market, that's a nice place. So what are you guys thoughts, David? [00:26:10] S1: Yeah. I actually tweeted out this morning. I actually thought that enterprises kind of can have their cake and eat it too. One, you get a US open source model that's near frontier intelligence. That's three to four times more cost effective, I e, cheaper. And that's music to the years of any enterprise because there's obviously gonna be some hesitation by using Chinese open source models, especially if you're in a regulated industry or industry that deals a lot of sensitive information. To me, this is a... Was a very noteworthy announcement. Again, I do wanna disclose the Sequoia's investor and re... Reflection, but I think it's great for the enterprise.
00:26:10 · Dev Ittycheria, Jason Lemkin
[00:26:10] S1: Yeah. I actually tweeted out this morning. I actually thought that enterprises kind of can have their cake and eat it too. One, you get a US open source model that's near frontier intelligence. That's three to four times more cost effective, I e, cheaper. And that's music to the years of any enterprise because there's obviously gonna be some hesitation by using Chinese open source models, especially if you're in a regulated industry or industry that deals a lot of sensitive information. To me, this is a... Was a very noteworthy announcement. Again, I do wanna disclose the Sequoia's investor and re... Reflection, but I think it's great for the enterprise. [00:26:45] S2: That was a Dreamforce this year, right, and got to actually have the surprisingly large number of conversations with execs. Notwithstanding the incredible force of nature of Chinese based open weight models. When I nobody I talked to really wanted to use a Chinese source model, right or wrong, fair or not. Everybody that was, they felt like it was under duress for cost, but no one really wanted to use one. Again, right or wrong. So, you know, if they nail this right, it could be a torrent of demand.
00:26:45 · Jason Lemkin, Dev Ittycheria
[00:26:45] S2: That was a Dreamforce this year, right, and got to actually have the surprisingly large number of conversations with execs. Notwithstanding the incredible force of nature of Chinese based open weight models. When I nobody I talked to really wanted to use a Chinese source model, right or wrong, fair or not. Everybody that was, they felt like it was under duress for cost, but no one really wanted to use one. Again, right or wrong. So, you know, if they nail this right, it could be a torrent of demand. [00:27:10] S1: I agree. And I think this also reinforces a point that you don't need, you know, the frontier level intelligence for every workload. If it's close to the frontier, as Rory said, within six months of the latest models and addresses 90% of your use cases, like especially around reasoning use cases like coding and agentic workloads, I don't see why enterprises would not kind of want to talk to them immediately.
00:27:33 · Rory O'Driscoll
[00:27:33] S0: Ties back to the first topic at one level. So far the evidence has been that there hasn't been a massive push because people are lazy and the bills haven't been astronomical. And therefore they've just kind of used the frontier model and maybe downgraded to the Anthropic or OpenAI less expensive model levels. But I agree. I think the interesting thing now is because the numbers are getting so huge. I mean, if OpenTropicAreach making $70,000,000,000 in ARR, that's $140,000,000,000 that's more than Microsoft taxed for the longest time across both Windows and Office. That's a chunk of US corporate profits, right? And at that point in time, if you're a CFO, you probably come in to your CIO and say, I don't care that it's easier to choose you as Anthropic, dude. We need to shave $3,000,000 off this token bill. So start using JEV for 20% of your decisions, start using reflection or something for anything that's not frontier and figure out a way how to use Entropic for the hardship. I'd imagine, Dev, you guys will start to have those conversations and all your customers will. That's why, again, these growth rates are so interesting right now for Entropic. Can they still maintain that unparalleled growth rate in the context of this kind of chipping away? It's like, remember the old man in the sea, the guy's bringing back the fish, and then the the the other fish are known at bits of the body. You know, they're just taking away slugs of revenue from them.