The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
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.
00:50:52 · Harry Stebbings, Rory O'Driscoll
[00:50:52] S2: It's worth 110,000,000,000. [00:50:53] S1: So you can say, there's a thing that exists today that's 30 times the value of this, therefore I can have that money. Whereas for Baseten and for Cognition, you have to say, there's no standalone coding agent worth 80,000,000,000. So it's... Good news, it's a new market. Bad news is, what are you mentally taking over? You know what I mean? And the same is true of inference. [00:51:11] S2: No. No. Bad news is that you're fourth in the market. You got Codex, you got Claude Code, you got Cursor, and then you got them. Jeez. Don't get me wrong. I'm I'm all for independence. I... I'm an investor in Factory as well, and I totally buy that. But that versus, Serval versus ServiceNow. Bit of an easier one. [00:51:29] S1: Okay. [00:51:29] S2: So wild. Rory, you'll be surprised to hear that my girlfriend is still with me. I know. My mother is shocked too. But in the legal world, woah. Mega News, one of the big law firms, the prestigious OG brands, while shut down very quickly and weirdly because of partner dispute, whatever, AI law firm Crosby, who've raised $85,000,000 from Sequoia and the like, bid to take over its assets and it's like its brand. Anything to say here? I thought that was fascinating.
00:51:29 · Harry Stebbings, Rory O'Driscoll, Jason Lemkin
[00:51:29] S2: So wild. Rory, you'll be surprised to hear that my girlfriend is still with me. I know. My mother is shocked too. But in the legal world, woah. Mega News, one of the big law firms, the prestigious OG brands, while shut down very quickly and weirdly because of partner dispute, whatever, AI law firm Crosby, who've raised $85,000,000 from Sequoia and the like, bid to take over its assets and it's like its brand. Anything to say here? I thought that was fascinating. [00:52:03] S1: I mean, it's two separate stories. There's The Weil, Gotshal crashing, which is a, you know, American law. It's not a tech story. It's an American law story. You lose a couple of key partners. These firms are, even though they don't have a lot of liabilities other than leases, it's just a bunch of connected rainmakers and sometimes the- [00:52:18] S2: That's a flim... No offense, Roy, that's a very flimsy way of looking at it. A couple of partners leave does not mean a ninety year prestigious law [00:52:26] S1: firm. [00:52:26] S0: Yeah, if you take enough of the book of business with you, It's it [00:52:29] S1: small number of rainmakers, absolutely. It's not like [00:52:31] S0: It's worse than if you leave a VC firm, the VC firm dies but over twenty years. If the top rainmakers leave, there's nothing to pay out at the end of the year.
00:52:31 · Jason Lemkin, Rory O'Driscoll, Harry Stebbings
[00:52:31] S0: It's worse than if you leave a VC firm, the VC firm dies but over twenty years. If the top rainmakers leave, there's nothing to pay out at the end of the year. [00:52:39] S1: If you look through it, I read all the accounts, I don't know as well. As I said, it's four or five key lawyers, each of whom run a key part of the business, there seems to be a clash on a couple of them. I think the guy who ran all the PE practice, which is probably twenty-thirty percent of a company like this, left Texas Book of Business. And, yeah, it can go wrong pretty quickly. So... But it doesn't matter because that's not a tech business. That's just a wow. That's interesting. And then I did I did admire Crosby for just... That's just a, hey. If there's some attention to be paid here, why don't I put in a bid for the business? That was that was that was a bit of a fuck you, but I was I was impressively. Chutzpah, I think is a relevant word there for that. That was Chutzpah. [00:53:13] S2: I loved it. Ryan just like, yeah, we'll take it. [00:53:16] S1: Yeah. If you don't want this 100 year old franchise, we'll take it here.