The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:44:32 · Rory O'Driscoll, Harry Stebbings
[00:44:32] S1: Okay. So you do... You think your upside in Serval at 3,000,000,000 is better than your upside at Cognition at 70,000,000,000. [00:44:37] S2: Oh my god. The tide is changing. ServiceNow is an old guard. Bill McDermott's amazing, but he's like Slootman. He's a sales led CEO. We're in a product led generation. Jake and Tatiana at Serval are incredible. The product's amazing. The enterprise adoption is better than I've ever seen. And the upside, just pure multiple on cash. Now there's an there's an addendum and a star, which we can go back to. Multiple, way better here. The chance of getting a a 10 x here, I think very likely. The chance of getting a 10 x for base 10 at 30,000,000,000, god, you've gotta squint. The chance to get a 10 x at Cognition, to Jason's point, gosh, we're nearly hitting a trillion there. So, yeah, I think the multiple is clearly much more evident there. Now the challenge, though, that we have with Serval that we don't have with Cognition or Baseten is if we're an AUM play just putting cash out the door, they only raised a 150,000,000. And if I'm Andreessen, I wanna put 500,000,000, 1,000,000,000 out the door. And so,, as we say in The UK, I need to do Cognition because I need to move money. But for the multiple, it's the easiest decision you [00:45:44] S1: made. Interesting.
00:45:44 · Rory O'Driscoll, Jason Lemkin
[00:45:44] S1: made. Interesting. [00:45:45] S0: You know what the question about Serval, I don't know. I really don't know it at all. The founders don't know it. This is just my question to the IC. Does it expand the TAM? Am I bounded... For for real for real. Right? Not for hand waving. Am I in essence bounded by a subset of ServiceNow's TAM today, right? Now every founder will expand the markets and add concentric circles, but is this really expanding the TAM here? I generally don't know, but I personally am not excited about disrupting existing players if you don't expand the TAM, because I think we don't get anywhere at the end of day.
00:46:16 · Rory O'Driscoll
[00:46:16] S1: And I think the argument they'd make would be some version of ServiceNow just is a list of things that IT has to do. And Serval is actually a product that does those things for you. So you can command more value from it. And the way you'd validate that is looking at their ACV on a like with like basis. In other words, there's a mid market company that might spend $200 on ServiceNow, would that same company be willing to spend 300 or $400 on Serval? And that's what you'd need to see to get TAM expansion. Because, I mean, we think... I know one of my colleagues had talked to him in past, this is an amazing company, amazing team, a great market. Mean, it's always worth remembering. Until recently, Servicenow was, I think, the second largest market cap SaaS company. You had Salesforce and then Servicenow. ITSM is a much bigger market than you think because it kind of becomes the general corporate to do list for service functions like legal, accounting, all the back office folks were using ServiceNow to keep track of their tasks. So it's been a way bigger business than I would have guessed when we saw it in, what was it, 2010 or so, right? So yeah, replacement for that is a big opportunity. But I hear you, Jason, it's the, can you expand the TAM? And are you dealing with a ten year grind ServiceNow down deal where you do it forever? Whereas Harry, to take the other side of the argument on Cognition, I mean, the beauty of the coding agents is, special cognition, they're coming into large enterprises and basically saying, We will help you effectively rewrite your entire code base, enable your team to be agentic coding, and getting huge dollars for that. So in terms of money velocity on the table right now, Cognition has just an ability to command many more dollars. I think Serval probably has the compounding effect of those probably ten or fifteen years of grinding down service now to a bigger outcome. So I don't know, it's kind of velocity, capped versus long term great mega trends, but is it going to take a while?
00:48:06 · Jason Lemkin, Rory O'Driscoll
[00:48:06] S0: Look at this, it may well resolve tickets the ServiceNow can only track. It may be an epic play. I'm just trying to, I think Serval aside, 2027 will be a year where we find out a lot of vertical AI plays are nifty little startups, but didn't in the end expand TAM enough. They didn't expand TAM. They're fighting for a slice of service now, a slide of Salesforce, a slice of Atlassian, but they're not expanding the TAM. Personally, I don't want to invest in any of them because I just view it as tiers in five years. [00:48:32] S1: I don't think that's the case with Serval. I think they are expanding the TAM. I'm sure they'd push back very vigorously on the vertical description. I mean, I think it's very cross functional and [00:48:41] S0: cross No, I'm just, it's an adjacent point I was trying to make, but I [00:48:44] S1: get I'm arguing. [00:48:45] S0: I think in vertical, we're going see the biggest tiers because a lot of folks are going to make investments assuming that especially for like an SMB or an AeroVerre, you can charge three to four times the size. And we're going find out, you know what, you can charge one X the size. And now there's five or eight times the competitors in the market and the leader isn't dead, right? The leader isn't, they're still a lot, they still have a pulse. They may not be growing at the rate before. And so you're just slicing up the same old F and TAM 11 times. I just don't want to personally make those bets because it's exhausting. Right? It's exhausting.
00:48:45 · Jason Lemkin, Rory O'Driscoll, Harry Stebbings
[00:48:45] S0: I think in vertical, we're going see the biggest tiers because a lot of folks are going to make investments assuming that especially for like an SMB or an AeroVerre, you can charge three to four times the size. And we're going find out, you know what, you can charge one X the size. And now there's five or eight times the competitors in the market and the leader isn't dead, right? The leader isn't, they're still a lot, they still have a pulse. They may not be growing at the rate before. And so you're just slicing up the same old F and TAM 11 times. I just don't want to personally make those bets because it's exhausting. Right? It's exhausting. [00:49:15] S1: And then it's been funny. We've... As I said, that's why it's such an interesting... It's really genuinely interesting question. I'm like, literally thinking of it as an investor here rather than just blathering on as I... We've kinda gone between the 80,000,000,000 one of Cognition and Serval and kinda base ten in the middle. I mean, if you want revenue velocity right now, nothing gives you revenue velocity like inference. But from your little face, Harry, are are you implying the angst there is just competition? There's five or six great companies in that space and not to worry? [00:49:40] S2: I would I would a 100% invest in Baseten too, by the way. [00:49:42] S1: But the whole point is there is no two. You gotta pick.
00:49:42 · Rory O'Driscoll, Harry Stebbings
[00:49:42] S1: But the whole point is there is no two. You gotta pick. [00:49:45] S2: But... Yeah. But, no, I would not choose it compared to Serval or Cognition. And I think Modal's product suite is unbelievably strong. Like, Eric is incredible for that. And and Lynn and the team at Fireworks, by far, I think, have the best inference product. And so I I would choose, you know, Modal and Fireworks. And so it's super clear for me on Serval. [00:50:03] S1: Okay. That was a fun question. [00:50:05] S2: Rory, did I change your mind? You made me think... [00:50:07] S1: No. A genuine a genuine comment. This is like, this made me think. Right? These are three very different interesting dynamic. I mean, it it makes you think about, you know, what's your bet? Is it very horizontal inference, but lots of competition, risk of commoditization? Is it the last surviving standalone coding agent that's cracked the enterprise, but at a very hefty price? Or is it an app that I think will be the... If there is a next generation service now, the probability of it being Serval is probably 80%, 70% plus. And those are very different bets. You know, I'm I'm actually literally thinking they're all for the record pretty interesting bets. The one nagging comment, and I don't know if this is correct, is the good thing about Serval is you can say... This is your point, Harry, is that the old school company is worth, I I can't can't remember, I used to know the number, or 50. [00:50:52] S2: It's worth 110,000,000,000.