This Week in Startups
01:05:16 · D.A. Wallach, S0, Dave McClure
[01:05:16] S2: Can. I gotta comment. [01:05:17] S0: Please. Get in there. [01:05:18] S2: I understand the incentives that drive asset managers. Those indeed have led to secondary funds, you know, closed end funds in the public market with private stuff. We need the equity. Stage. We need the equity. Megatrons. But let's again zoom out to the ten year, twenty year view as venture capitalist guys. Twenty year. Here's what the AI is doing, man. The AI is making it so cheap and high leverage to be an entrepreneur. Okay? The best entrepreneurs of the next few years are going to raise less money than the best startup founders have ever raised. Okay? Because they don't need it. And the... And and so, you know, the pendulum of history is gonna swing right back in the other direction. The people who are gonna make the money off the next Anthropics are gonna be these people who are running small funds, writing small checks to entrepreneurs who don't need a $100,000,000 seed. Love [01:06:20] S3: it. I'm not saying the emerging managers are out of business. I just think a lot of their money is going to SPVs, not funds. I think that
01:06:26 · S0
[01:06:26] S0: was I my think, D. A, I'm gonna go with you on this because here's the thing. The game on the field was, you know, hey. If you do an SPV in SpaceX, you know, it's... It always goes up into the right. And that was true, and Elon's amazing. There was money to be made there. Right? But now if everybody's doing it, is there money to be made there? And is your little 5 or $10,000,000 allocation any different than the other person's? And is it a race to the bottom? And when you go talk to family offices with your $10,000,000 allocation and you're trying to get 2% a year in fees and you're, what, your 20% carry, they're just gonna grind you down because they have other places to buy it from, and it's becoming a bit of a fluid market there, which means it's gonna be commoditized. Now you go to the early stage, and nobody wants to do that work. When I talk to young founders, it is so hard for them to raise that first round that they're willing to do a $10,000,000 valuation, a $5,000,000 valuation, a $20,000,000 valuation, and get the right people on. And they are now becoming alicorns. Alicorns are the next unicorns. An alicorn is a unicorn with wings, the Pegasus wings. And this is the future. The future is alicorns because they become unicorns because they get to billion dollars. This is it, it's the future is alicorns. They get to a billion in revenue by flying over funding rounds. They are more capital efficient, and they use their Pegasus wings to fly over a funding round. They skip their series b. They skip their second pre seed, post seed, pre series a nonsense convertible because they have revenue. The ability to get your revenue DA, which which you left out of your thesis, but is implied in it, they get to revenue quicker. And then they... When they go talk to VCs, they're like, I don't need to raise around. Have now had to go to three or four of my alicorns and say, your your valuation's going up very fast. Can you please just take $1,020,000,000 off the table so we just have a rainy day fund at a 250,000,000, a billion dollar valuation? And I have to walk them through that economics, D. A, to just like... We're diluting 5% here.
01:08:38 · D.A. Wallach, Dave McClure, S0
[01:08:38] S2: These eight to the 16 year olds right now in their in their bedrooms who are building all this shit with agents, and they're token maxing, and they're starting companies, and they have no money and no one's permission. [01:08:52] S3: Token max. [01:08:53] S2: These are gonna be the these are going to be the greatest fucking entrepreneurs in human history. These are a these are a different species. Okay? Different species. When you get... When you... You're getting all these automated emails, I'm sure all of you all day, it's from these kids in, you know, Pakistan in their parents' bedroom using clauderware. I don't even know what they're doing. [01:09:12] S0: Yes. [01:09:13] S2: But I can tell you, they're amazing, and they're gonna crush, and Lightspeed has no interest in talking to them. [01:09:19] S0: There it is. The big have gotten too big, folks. This has been another amazing episode of This Week in VC. Lon, let's thank our guests and give them a proper plug.
01:09:19 · S0, Lon Harris, Ben Black
[01:09:19] S0: There it is. The big have gotten too big, folks. This has been another amazing episode of This Week in VC. Lon, let's thank our guests and give them a proper plug. [01:09:31] S1: Thanks to D. A. Wallach. He's the cofounder and general partner of Time BioVentures, a life sciences and health care venture capital firm. D. A. You are amazing. Thanks for being here. Dave McClure, our old friend, managing partner at Practical Venture Capital. They're a firm focused on the venture's secondary market. There it is on your screen. And Ben Black, the cofounder and managing director of Akkadian Ventures, a firm that invests in venture secretary sec... Secondaries and runs, SPVs. He's also the chief investment officer of Powerlaw Corp, the closed end fund that trades on Nasdaq as PWRL. Thanks to Ben and our entire panel for being here. [01:10:09] S0: Alright. Well done, everybody. [01:10:10] S4: Thanks for having me.
01:10:11 · S0
[01:10:11] S0: And if you could all do me one favor, Lon, pull up this week in Startups, Substack here. We have a little announcement. Lon and I have been working in the laboratory. We have a little announcement here. We looked at our email newsletters. We looked at all the newsletters out there in the world, D. A. And we said from first principles, what do our founders need? And we listen to them, we make a 100 investments a year, we have a couple of programs and they always say the same thing to us. We need money and we need very tactical advice. They say, well, what do you need the tactical advice on? They say hiring, growth, product market fit, etcetera. So we said, okay, we can help with that. We have products for introducing them to investors. So now twice a week, a 100 times a year, we are in a competition to find the best tactical and practical applications. And we're making newsletters out of them, but we also do these events live. And we're trying to hire two full time writers to help with this effort. Twistartups.substack.com. Twistartups.substack.com. We charge a $100 a year for this. Why do we charge a $100 a year? We're arms dealers at this point, Yeah. You know, if one founder has this information, then the other ones don't. And so you put a $100 into the kitty, it's gonna go up to $2.50 at some point. But we're just hoping to get a thousand people to subscribe to this for a $100 each, and then keep us honest. Hit reply and tell us it sucks or it's great. And the goal here is just to make it sustainable, not looking to make a killing on these, but we want to have enough that we have two or three smart people working on getting this important information to our portfolio companies and the thousand people who join us to subscribe to this newsletter. That's my little mini plug, D. A. Mini plug. Can you give D. A. A complimentary subscription, please? Please. And then he'll give me con... He'll give me...
01:12:07 · D.A. Wallach, S0, Lon Harris
[01:12:07] S2: Oh, what about Dave and Ben? [01:12:09] S0: No. Want to pay. I want them to pay specifically. I want their credit card number so I can upsell them. No. No. You can give it to all [01:12:15] S1: email in any of the chats, and I will add you for free. [01:12:18] S0: You you figure it out. Don't make them work. Go find their emails. [01:12:20] S1: Come on. I'll I'll [01:12:21] S0: figure Great job, everybody. We'll see you next time. Bye bye.