The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:53:12 · Rory O'Driscoll, Dev Ittycheria
[00:53:12] S0: I actually do. I think it is. Because I think both Profound, I know both companies actually wrote a term sheet on the Profound A, wish we got it. And I think naturally both those companies, when they're finished figuring out how you show up on ChatGPT for humans are going to quickly evolve to how do I if agents are who I need to show up for, then by God, I need to tell my customers how to show up for agents. So I think it's a natural next product extension. Don't get kind of caught up in the minutiae of, Oh, we only do it for humans. Zooming out, as Jason has convinced us, everyone, humans and agents, will make purchasing decisions using LLMs and using information they get online, and you're going to have to make sure, as a vendor, that you show up correctly. And whatever that takes, the opportunity there is to sell a solution to the marketing person who's got to solve that problem in any company. There's some dude at MongoDB who is going to be figuring out this afternoon, check how we show up on agents to make sure when Jason needs to get a database, we show up first. And if that person needs to have some way of surveying what other people are saying about them, what other agents are saying about them, that's a product that MongoDB is going to buy. And I think that's the profound opportunity, it's the peak opportunity. It's a bunch of other companies in this space. I think it's a good space. For some, I think it's going to have more depth than the SEMrush space, which ended up commodified and boring for a whole bunch of reasons. [00:54:33] S1: I agree.
00:54:33 · Dev Ittycheria, Rory O'Driscoll, Harry Stebbings, Jason Lemkin
[00:54:33] S1: I agree. [00:54:34] S0: I mean, reminder, we did the series, I think, see at HubSpot, and I say this over here, it was an SEO company to start out, but they just did a brilliant job of adding a whole bunch of other stuff on top. You solve the customer's immediate pain point, especially these marketing platforms, you solve the customer's immediate pain point, and then they realize they have an adjacent pain point, and you solve that, and then you solve the one after that. And I think every marketing person has a three year list of pain that they have to solve in terms of how they show up in the new world of LLMs, and they want all the help they can get for that. If you make solutions, you can make money here. So I think it's a super good market. [00:55:09] S3: What topic have I missed, boys from the list, that I have to discuss? [00:55:13] S2: Okay. There was one I liked, but I I like the one because it could change a lot of tech stuff. The engineers suing, which one was it? Which which are they? The license deals? I didn't think about that, but now it seems like an obvious claim that that, like, I lost the benefit of my consideration by doing this. I don't know where the lawyers come out on this one, but, yeah, give us the background on this one.
00:55:13 · Jason Lemkin, Harry Stebbings
[00:55:13] S2: Okay. There was one I liked, but I I like the one because it could change a lot of tech stuff. The engineers suing, which one was it? Which which are they? The license deals? I didn't think about that, but now it seems like an obvious claim that that, like, I lost the benefit of my consideration by doing this. I don't know where the lawyers come out on this one, but, yeah, give us the background on this one. [00:55:34] S3: Grox engineers sue over NVIDIA's $17,000,000,000 license and hire deal. Two former engineers sued in Delaware, alleged Grock's board effectively sold its core technology and top 200 staff to NVIDIA through an 11,000,000,000 license plus, about 3,000,000,000 in stock, leaving common holders with a hollowed out company.
00:55:51 · Rory O'Driscoll
[00:55:51] S0: The news is that they perceive that there might be a course of action because zooming out a million miles, corporate law tries to say everybody gets treated the same and there's two hundred years of precedent, and you know exactly how it happens. All common shoulders get treated the same. Board members have a duty of care, fiduciary duty to all shareholders. Your case law up the wazoo has to happen. And this stuff tears up all the case law, and it effectively allows the buyer to reallocate consideration in the company. Hey, you guys are coming across, and you get a lot of money. You guys are getting stayed behind, and you get a little money. And crucially, these two employees had already left the company. And I don't know this for sure, but my guess is when the acquirer is allocating capital, they don't say, oh, I also want to take care of the ex employees, because they're like, why would I bother? But Delaware law says everyone who owns a common shareholder is exactly the same, and it's one of the non negotiable principles of this stuff that you treat everyone in the same security in the same way. So when I read that, I'm taught, that's interesting. That's a clever little case. And it'll run a little. I wouldn't be surprised to see it settled because there's probably only a small number of people in the class because my guess is everyone who came across was happy. My guess is everyone who stayed and got stuck is happy, so it could be a relatively small number of people who'd left already. But it's gonna be an interesting case where they probably have some legal argument to make.
00:57:15 · Dev Ittycheria
[00:57:15] S1: Yeah. I'll connect dots. Right? Remember, we started this discussion about people leaving and, you know, leaving very, very quickly. And here's the parallel I draw is like investors long ago and actually even more recently have learned to protect themselves in situations. They negotiate these kind of issues upfront, what happens in any kind of exit, including a weird one. Employees never thought to ask about this. So if you're a founder, you're gonna have employees saying, hold on, what happens to my equity if the company's tech and some members of the team get bought, but the company doesn't? And I think founders need to be able to answer that question because that's a question as people learn about this, it's going to be coming up more and more often, especially if people switch between companies very often.
00:57:56 · Rory O'Driscoll
[00:57:56] S0: And the idea of corporate law Delaware or even if you go to a place like Texas, you shouldn't have to think about it as an employee because it's like, dude, there's common law and you'll all be taking care of the same. But once that gets eroded, as you say that, once that you know it's up for grabs, then it's quite insidious. And you're right, everyone has to think, when I join a company, I don't just have to think what my 1% is worth. I have to think, well, what could happen to my 1% if you sell the IP? What could happen to my 1% if you sell the IP and half the employees? And I think it probably makes everything harder to pull off. So it'll be interesting to see if this leads to some kind of pushback away from those kind of structures. I mean, they're not ideal, and the the only reason people are doing them is because of the FTC. I mean, no one ever say this because they can't, but it's because of the FTC and the fact that you can't get M and A through in any appreciable time, whereas you can get these deals done literally overnight and the employees start next days. It's a workaround, a regulatory problem that is no surprise creating a bunch of second order issues and unfairness.