The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:00:00 · Jason Lemkin, Rory O'Driscoll
[00:00:00] S0: I think Zucks had a lonely stretch. There's a material chance Meta has a just a monster AI product on its hands. [00:00:06] S1: We roughly generated 20 plus or minus decacorns per decade for the last five decades. And we generated, what did you say, 42 decacorns in less than a full year of this decade. [00:00:20] S0: I think everyone without massive scale is living a worse sasspocalypse than in March or April. I don't think we should be breathing any sighs of relief.
00:00:27 · Harry Stebbings
[00:00:27] S2: This is 20 VC with me, Harry Stebbings. Now Jason Lemkin, Rory O'Driscoll, the biggest news in tech. What is on the agenda today? My word, the salaciousness. We have Valor Atomics sues its own pre seed investor day one and the pro rata debate that ensued on Twitter. Then we have Meta, Zuck, and Alex Wang. The bromance is real. They're crushing it with Muse Wonder, their new model just shy of Opus. And then big tech, they shopping. Amazon in talks to buy Descartes and Nvidia circling around Reflection for a whopping $30,000,000,000. This and so much more later today. But before we dive into the show today, every great software company eventually runs into money. Uber had to move it. Shopify had to hold it. Airbnb had to settle it. Money movement stopped being a fintech problem. It became a software problem. And increasingly, god, it's an AI problem too. Zero Hash is the infrastructure that makes global instant money movement seamless. One API integration for stablecoins, digital assets, and modern payment rails so builders can stay builders. Zero Hash powers some of the world's largest enterprises and financial institutions, including Kalshi, Stripe, Morgan Stanley, Gusto, and Interactive Brokers. If you're thinking about stablecoins, digital assets, and the future of money, it's time to talk to the team at Zero Hash. Visit 0hash.com/20vc to learn more. While Zero Hash powers your crypto infrastructure, Deal helps you build a global team. We get it. Global IT can be a headache. New hire in Tokyo, but the laptop, well, it's stuck in London. Someone left the company last week. Wait. Is that access already revoked? Deal IT handles hardware, software, and access to it across a 130 countries from one system. You have the right to be impressed. Brands like eleven Labs are already managing their global IT scale with Deal. It's one system, one source of truth with zero vendor gaps or manual workarounds. So build your global team with Deal. Visit deel.com/20vc and start expanding your business today. While Deal builds the team, Framer builds the site. Framer is a complete website platform, not just a builder, so teams can launch and keep improving their sites in one place. Framer is the AI website builder that helps creators, teams, and businesses ship production ready sites faster than ever while getting every detail right.
00:02:59 · Harry Stebbings, Rory O'Driscoll
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00:04:42 · Rory O'Driscoll
[00:04:42] S1: And just to remind everyone, pro rata simply means if you own 5% of the company, you can get 5% of any round, so you can, quote, protect your ownership. Typically, major investors get that. It's typical also that a majority of the investors can waive it for everyone. So someone can say, hey, you know, if most of us don't want to do this, because we want to do a different thing for the company, that's right for the company. Normally, you should just be able to waive it, and then those rights go away for everyone. So it cancels the problem entirely. But then you mentioned that the second thing is you have these weird springback rights, which it's something like if we waive a pro rata rights, and then one of the investors who had pro rata rights gets to put some money in, then you can say, hey, you waived, but then you took care of yourself, especially, That's kind of unfair. It's not really a fair vote. So I get my spring back rights too. And that's what I think day one is... Was asserting at one point in time. And there's actually another level of app. But those are the two big rights.
00:05:36 · Jason Lemkin
[00:05:36] S0: I think as usual in these disputes, no one's a 100% right here. It's rare in life. There are disputes where someone's a 100% in the wrong. And even when you look back, you might say, you know what? Maybe I contributed just a little bit to that. Here's here's my read of the situation for what it's worth. Here's here's the more interesting thing. What what happened? Listen, we only can read the tweets. Right? And I love the fact that immediately everyone was all over it saying that day one was suing their portfolio company, which was completely wrong. Right? It was quite, it's quite the opposite, right? They may have hired, Quinn Emmanuel now a notorious firm, but it's, it's, it's Valor that wants declaratory judgment to move on. They just want an answer. So all of a sudden X decided that Day One had sued their portfolio company, which wasn't true. The other thing that I think if I read what Masha, who's my co investor and owner, I don't know her that well, but I have observed her behavior and she's a good investor. It sounds like to Rory's point, what really happened was Sequoia came in very aggressively and said, we're going to make, we're going make you a great offer. We're going make you a fast offer. It's clean. It's simple. And just like Sequoia and index and others do, everyone has to waive their pro rata so that we can get our ownership target. And I can say as a seed investor, this happens all the time. It happens all the time. The big funds, in fact, they put in their term sheet without even checking it. Their lawyers immediately put in that my pro rata is waived in every single round. Okay. So it happened here, probably annoyed day one because they clearly had, even though they're a $450,000,000 total fund, they have more funds, whether it's SBV or whatever. So this annoyed them. They want to do the pro rata. So be it. And then Valor said, Oh, we're actually letting one of our investors because they're strategic. They're strategic. This might piss me off too. First of all if they're strategic they're already on the cap table. You got the strategy. You already got the strategy you need. If they're a new investor, if someone wants to invest and help this nuclear startup go further, that's truly strategic. Let them the hell in, right? But this is someone already on the cap table that wants to own more, which I get.
00:07:32 · Jason Lemkin, Rory O'Driscoll
That probably means they're adding more nominal value than your early investor, which I get. But this is the whole point, right? This is you're not supposed to play favorites. And so I get all of it. Having said all of this, I've observed versions of this many times. I've observed VCs suing their portfolio companies for doing the wrong thing. When founders have decided to do this, you just got to get with the program. At the end of the day, when the founders are in the wrong here and the big funds often convince founders to do some things that are a little bit wrong, you just got to get with the program. It's not your company. [00:08:04] S1: It was to be clear, say, hey, that feels unfair, but I accept. I'm not going to waste time with mister Quinn and mister Emmanuel. I'm just gonna go with it. Is that what you're saying?