The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
01:02:05 · Harry Stebbings, Jason Lemkin
[01:02:05] S2: Is he with Cresta? [01:02:06] S0: I think what's happening, if you just look at all the deals that have been bought, this, this I saw, I'm dating myself back at Adobe, but obviously there's a little bit changing in the world with AI and B2B, right? So basically everybody's getting a punch card, right? They bought us some defense startup, I don't even know that for a couple $100,000,000, right? And what you do is you go around the table with all your SVPs and they get their best idea. And whoever was in service or support or whatever, Cresta was their best idea. And whoever was trying to get these sort of support and sales agents faster, Fin was their best idea. And you just keep, it's not that complicated. They go down the best idea and then someone goes out and figures out if they'll actually sell because some folks won't sell. And you just make this best idea and then people know their jobs are on the line. And so none of these deals are mark betting the future of the company. They're SVP chips. And I've been in the room when you went around the room. Rory, what's your best idea? Harry, what's your best idea? Come back next week. I want your top three ideas. And it costs you nothing in a sense because it's assumed some will fail, right? But basically they're getting around the table and they're saying, we're going to spend this much of our market cap and cash to do these deals because we to do something.
01:03:09 · Rory O'Driscoll, Harry Stebbings
[01:03:09] S1: And the interesting question is, do you do a Cresta, a more mature company that's using AI, but probably the original stack was pre LLM, and they've probably transposed their stack once the LLM has come out in the last four or five years. But in return for that, they have some scale, they have some enterprise deployments. Or do you buy something new, bright and shiny, where it's all LLM first, it's two guys from YC in '24, and they've got to $10,000,000 and they're exploding. Right? That is the interesting thing. [01:03:37] S2: Well, the interesting thing for me is that you've got a relatively similar price being paid for them versus Listen, but you're gonna have a 10x increase in revenue for Cresta versus Listen. Listen were 20,000,000 sold for 2,000,000,000, Cresta are well over 200,000,000 in ARR.
01:03:37 · Harry Stebbings, Rory O'Driscoll
[01:03:37] S2: Well, the interesting thing for me is that you've got a relatively similar price being paid for them versus Listen, but you're gonna have a 10x increase in revenue for Cresta versus Listen. Listen were 20,000,000 sold for 2,000,000,000, Cresta are well over 200,000,000 in ARR. [01:03:53] S1: And given that Sequoia is in boat, it's not like they miss the fact that they're getting a different revenue multiple. So yeah, on the other side of the table, you're right, the seller said, Yeah, I get why I want a high revenue multiple for Listen, because it's got growth and it's new. And I guess why I'm getting a still good, but not as a stellar revenue model for Cresta, because it's a more mature company. Yeah, no, you're right, it is interesting. It's the buyer deciding which bet do I want to take. And then thank you for reminding me, listen, that's a very good example. Do I want the ultra modern deal? But the problem is I'm going to have to pay a scary revenue multiple in terms of... When you're trading at 7x, to be fair, it's really hard to spend a lot of money at 40 x. You can spend maybe a couple of billion, but it it gets scary. [01:04:33] S2: I think the Cresta deal is actually pretty good. You're paying 10 x.
01:04:33 · Harry Stebbings, Rory O'Driscoll
[01:04:33] S2: I think the Cresta deal is actually pretty good. You're paying 10 x. [01:04:36] S1: I agree. No. I I I I agree. Exactly like... Yeah. I think the intercompany deal, think it's a smart deal for Salesforce. You get critical mass. You move the ball forward, maybe it's not as bright and shiny as the newest bright and shiny thing, but your service cloud business is your second largest, I think largest business now, and you have to make progress on that, I agree.
01:04:36 · Rory O'Driscoll, Jason Lemkin
[01:04:36] S1: I agree. No. I I I I agree. Exactly like... Yeah. I think the intercompany deal, think it's a smart deal for Salesforce. You get critical mass. You move the ball forward, maybe it's not as bright and shiny as the newest bright and shiny thing, but your service cloud business is your second largest, I think largest business now, and you have to make progress on that, I agree. [01:04:53] S0: What you'll find if you talk to a lot of the big players, what you'll find is if they want to do an M and A where they want to put their resources against it, their GTM machine, their platform, they'll all tell you this. They want at least 100,000,000 of revenue. And they'll wait and they'll take the meetings and they'll get excited. And what's the one Listen Labs, right? That's a tech bet. And most folks will tell you those are the dumbest bets, Either buy a small team and pay less or buy something with 9 figures. You only do a Listen Labs deal in times of stress because they'll all tell you that's their lowest investment performance. That's what it says. But it's just, it's a reason if you're confused as a founder why deals happen, a lot of them, they just decide if it's not $100,000,000 it doesn't have scale. Like I can't put my guys on it. I can't put my team on it. I've heard this from a of teams. It just is what it is. Even with Fin, their agentic business had to hit 100,000,000. The overall business was larger. It's the same story. And then all of a sudden, it's like, okay, now I can see how I can make this material in my $50,000,000,000 business.
01:04:53 · Jason Lemkin, Rory O'Driscoll, Harry Stebbings
[01:04:53] S0: What you'll find if you talk to a lot of the big players, what you'll find is if they want to do an M and A where they want to put their resources against it, their GTM machine, their platform, they'll all tell you this. They want at least 100,000,000 of revenue. And they'll wait and they'll take the meetings and they'll get excited. And what's the one Listen Labs, right? That's a tech bet. And most folks will tell you those are the dumbest bets, Either buy a small team and pay less or buy something with 9 figures. You only do a Listen Labs deal in times of stress because they'll all tell you that's their lowest investment performance. That's what it says. But it's just, it's a reason if you're confused as a founder why deals happen, a lot of them, they just decide if it's not $100,000,000 it doesn't have scale. Like I can't put my guys on it. I can't put my team on it. I've heard this from a of teams. It just is what it is. Even with Fin, their agentic business had to hit 100,000,000. The overall business was larger. It's the same story. And then all of a sudden, it's like, okay, now I can see how I can make this material in my $50,000,000,000 business. [01:05:51] S1: It's probably true. It's a shame, but it's probably true. [01:05:54] S0: I I don't even think... You know, it is a shame, but the Borg otherwise will just... They can't even assimilate you. You're too small. [01:05:59] S1: Oh, yeah. [01:06:00] S2: Alright, boys. It's time to go make some money. Back to our day jobs. [01:06:03] S1: Oh, that's what I meant. [01:06:03] S2: Let's do this.