The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:23:46 · Harry Stebbings, Scott Wilson
[00:23:46] S1: When is it interesting for you to get involved? Company valuations are soaring so far so quickly today. How do you think about, like... When's the wash you insertion? [00:23:55] S0: I mean, we come across at all stages. It's more driven by, like, our opportunity set at the time than than any specific, like, strategy we're targeting this stage of company. But I I'd say we're not good, super early stage investors. That's a really tough skill set that I would say we don't have. So if we can't, you know, talk to customers, understand the product, you know, understand what we think unit economics look like, that's that's something that's gonna be hard for us to build conviction in. So it tends not to be a lot of c or series a. [00:24:25] S1: Does it become difficult as more and more of these funds have IR teams? And so the distance between you and the manager becomes more real, and your ability to get information, get deals becomes more buffered.
00:24:25 · Harry Stebbings, Scott Wilson
[00:24:25] S1: Does it become difficult as more and more of these funds have IR teams? And so the distance between you and the manager becomes more real, and your ability to get information, get deals becomes more buffered. [00:24:37] S0: Yeah. Well, we've... I don't think many of our funds that we're real close to even have IR teams, but, some of them have somebody that functions like our our our guests. But the way we typically do it is more, we're much more proactive. Like, we're not waiting for them to bring us a deal. You know, we're going out and saying, Harry, like, are the five companies in your portfolio that you're most excited about? And then we'll just go out and meet those five companies. And if, you know, if we find one that we think is really interesting, we'd be like, hey, we would love to get involved with this company. If there's a chance for us to help lead the next round or, you know, we've led employee tender offers. We've gotten direct on the cap table. We've done lots of things that, help us get exposure, but that is more offensive than we're waiting for the... Your IR person to call us and say, hey, we have... And we're doing an SPV in this fund. And I actually think, like, there's a huge negative selection bias if you're just waiting for someone to give you a a call and say, hey. We have, you know, $500,000,000 of OpenAI that we're syndicating out.
00:24:37 · Scott Wilson, Harry Stebbings
[00:24:37] S0: Yeah. Well, we've... I don't think many of our funds that we're real close to even have IR teams, but, some of them have somebody that functions like our our our guests. But the way we typically do it is more, we're much more proactive. Like, we're not waiting for them to bring us a deal. You know, we're going out and saying, Harry, like, are the five companies in your portfolio that you're most excited about? And then we'll just go out and meet those five companies. And if, you know, if we find one that we think is really interesting, we'd be like, hey, we would love to get involved with this company. If there's a chance for us to help lead the next round or, you know, we've led employee tender offers. We've gotten direct on the cap table. We've done lots of things that, help us get exposure, but that is more offensive than we're waiting for the... Your IR person to call us and say, hey, we have... And we're doing an SPV in this fund. And I actually think, like, there's a huge negative selection bias if you're just waiting for someone to give you a a call and say, hey. We have, you know, $500,000,000 of OpenAI that we're syndicating out. [00:25:37] S1: Can I ask you, when you review the venture book that you've built in terms of managers, what do you know now that you wish you'd known back when you were at $8,000,000,000 when you were doing the fire sale?
00:25:37 · Harry Stebbings, Scott Wilson
[00:25:37] S1: Can I ask you, when you review the venture book that you've built in terms of managers, what do you know now that you wish you'd known back when you were at $8,000,000,000 when you were doing the fire sale? [00:25:47] S0: We've definitely learned some hard lessons. I I think maybe the biggest takeaway is, like, you know, we've done much better on this, like, offensive strategy than defensive strategy, so we do way fewer of co investment opportunities than we do outbound. That's probably the biggest takeaway. [00:26:03] S1: Are you concerned by where we are in the cycle? You're a very realist investor that, to me, really likes fundamentals. Today, a lot is detached from fundamentals, it would seem, especially from the private's world where you've got incredible exuberant pricing, real frothiness juxtaposed by this very real public markets reality. How do you think about that?
00:26:27 · Scott Wilson
[00:26:27] S0: I mean, I think, like, the markets have short memories. You know? If you look at the lessons from the original tech bubble in the two thousands and the GFC and 2021, like, from the crypto bubble, like, you know, we're seeing the same kind of stupidity that we saw in all those other cycles. And it's like every five years, particularly in private markets, you know, where I think the investors tend to be just less sophisticated. But it's clear to me that, like, there's a valuation premium in the private markets. You know, I, I don't know where anthra operating is gonna go public, but it's clear to me they could have raised capital in the private markets if they stayed, stayed in the private markets at north of 2,000,000,000,000, if they wanted to. I don't, I'm not convinced that the public market's gonna give them that same valuation maybe same with open AI, you know, Ora tried to go out. Cerebras tried to go or has traded really poorly since the IPO. SpaceX is basically back to really close to its IPO price. There's just too much capital chasing these kind of late stage champions in the private markets and the valuations are, I think that's why there's no DPI. It's not because the public markets aren't open. The public markets are pretty close to all time highs. It's just you can't go out public at the valuation that the private markets will get.
00:27:40 · Harry Stebbings, Scott Wilson
[00:27:40] S1: Why would you go public? Is this a permanent transition in the financing landscape? Where to your point that you could raise and stay private. The have proven that staying private and having a great business is very beneficial. You're still able to do amazing tender offers to your employees. You're able to do m and a and buy OpenRooter for $8,000,000,000. Hell, Scott, why are we gonna go public? [00:28:00] S0: There's a lot of rationale to stay to stay private. I think ultimately, like, the public markets are obviously much deeper capital markets. I think, you know, when SpaceX raised 85,000,000,000 or whatever in the IPO, that's pretty tough to do. You know, the sovereign wealth funds and the big pension funds and SoftBank, like, they can only write so many of those checks. And, you know, I think most of those capital sources have been exhausted, and the public markets are still multiple the size of the private markets. I think there's 14,000,000,000,000 or something globally in private markets. [00:28:28] S1: Do you think we're seeing a massive sell off now to make capacity for Anthropic? [00:28:33] S0: Could be. It would obviously be a lot of the same potential buyers. But, I mean, I think that... That's tough to kind of beta test. [00:28:40] S1: You you said about stupidity within private markets. What did you mean by stupidity? Like, what are you pointing to? Is it valuations? Is it deployment speeds?