The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:12:40 · Sameer Dholakia, Harry Stebbings
[00:12:40] S0: I think that once that Chinese model is hosted by Fireworks, it's no longer a Chinese model first. [00:12:47] S1: Do you think they see it like that? Me me and you both know that to be true. But when you speak to CIOs, they go, I don't want it. If the providence is China, I don't want it. And you're like, it's downloaded code on your local drives. [00:13:00] S0: Yeah. No. I... Listen. I've talked to some CIOs who who share that opinion for sure. There's no question that is out there. And by the way, I do think that we should have a great open weight model that is is US based, and I think that would be awesome. I think there's a big old map market. [00:13:15] S1: Is that is that a great business? [00:13:17] S0: It can be. For sure, can be. [00:13:19] S1: But if you look at, like, a thinking... You know, if you look at the thinking machines at a $40,000,000,000 price today, is there a $500,000,000,000 open model US to be built, or is just open a much harder business model to monetize, and therefore, it won't be that large?
00:13:19 · Harry Stebbings, Sameer Dholakia
[00:13:19] S1: But if you look at, like, a thinking... You know, if you look at the thinking machines at a $40,000,000,000 price today, is there a $500,000,000,000 open model US to be built, or is just open a much harder business model to monetize, and therefore, it won't be that large? [00:13:32] S0: Oh, no. I I believe it absolutely can build a a big business. Whether it's that particular scale, I don't know. But you can build a very large business and get venture returns. If you are the leading provider of a open source solution... I mean, you just look at history across, you know, all these other categories, whether you're going from Red Hat to, know, you fill in the blank in the database market. I mean, you can build you can build a very... You can find ways to monetize it for sure. And most enterprises don't wanna be responsible for the open source. They're gonna want some provider with the right talent behind it. All the reasons that open source businesses have been great businesses for for decades now. [00:14:06] S1: If you were to present a bear case for frontier models, what would it be?
00:14:06 · Harry Stebbings, Sameer Dholakia
[00:14:06] S1: If you were to present a bear case for frontier models, what would it be? [00:14:11] S0: Do I think there's a bear case for the frontier labs? I really don't because I believe that the... At the frontier, intelligence solving problems that were heretofore unsolvable or solving them at a pace that was heretofore unimaginable. I just think there's no shortage. Humans have so many problems to solve, Harry. We got a lot of problems in this world. We have a lot of them, and we... We're we're nowhere... It's not like we're at the 90... We're on the nine... You know, ninety ninth percentile of problem solved, and we're just trying to get to the last one. We have a lot of problems to go solve, and that's what these things will help us solve. [00:14:45] S1: The majority of people on the pod come on and say, we'll see 99 of token traffic flow through open models, but we'll see 99% of dollars flow through closed models. Do you think that's apt, or do you think that's kind of a bullshit throwaway comment? [00:14:58] S0: I think that I think that ratio is wrong. I really do. I don't think that's quite the mix. But to my previous comment, I don't think we have to get the mix per... Precise. I think everybody just has to understand that you just have to look at the size of them... Of the TAM.
00:14:58 · Sameer Dholakia, Harry Stebbings
[00:14:58] S0: I think that I think that ratio is wrong. I really do. I don't think that's quite the mix. But to my previous comment, I don't think we have to get the mix per... Precise. I think everybody just has to understand that you just have to look at the size of them... Of the TAM. [00:15:11] S1: 15,000,000,000. It seems now ridiculously cheap. How could you? That's amazing. 15,000,000,000 at the time was freaking wild. I got brought open now at 30,000,000,000. And to my stupidity, I said, oh my god, if this is 100,000,000,000, I like just three x it, not including dilution. Oh my god. The small mindedness that I had was just unbelievable. [00:15:33] S0: Harry, get out of my mind, man. I went through the exact same thing. [00:15:36] S1: So how did you get over it?
00:15:36 · Harry Stebbings, Sameer Dholakia
[00:15:36] S1: So how did you get over it? [00:15:37] S0: It was because in the intervening time... Right? So you remember that that OpenAI opportunity that I also passed on. I had the exact same thought pattern that you did, and that was right after the ChatGPT moment. Right? So the conversation was in December. And then in that intervening time, that little OpenAI went from 40,000,000 by the... To the time that we then looked at that first round of Anthropic. OpenAI had gone from, like, 40,000,000 to about... I wanna say, I'd have to go back and look at the numbers. You could fact check me, but it was something well north of a billion, billion and a half, maybe approximating two. And clearly, we got it wrong. And that is one of the both... I think one of the most humbling things about this job is that you will get them wrong. And sometimes you'll get them wrong on really, really important decisions, and you have the opportunity to fix it. It's not a once in a lifetime opportune... You could go back and fix it. And that was when Anthropic came along. The imagination was stretched. To your point, like, were... Our imaginations were capped at a certain even if it got to a 100,000,000,000. And now, obviously, you know, you could you could see the growth potential of how big this market could be because of what OpenAI had done in in calendar twenty three. [00:16:45] S1: In a world of $2,000,000,000,000 assets, do you care about price anymore? Like, is LP focused on price misplaced?
00:16:52 · Sameer Dholakia
[00:16:52] S0: Entry price always matters. Every venture capitalist has taught me that. By the way, I mean, know me. I'm four and a half years into this second career of mine, so I'm still learning. I appreciate that it is a craft like every other, and so I don't pretend to have all the answers by any stretch. But I know how important entry price is. And I will say that what matters most is whether or not you believe it can grow at scale and compound it for a very long time and still make you a venture return. And so I'm just very focused on the looking out the, as they always say, the windshield as opposed to the rearview mirror. And if I look at some of the investments of which I'm most proud, they were at current ARR multiples that would make most venture capitalists throw up. I mean... And they were difficult conversations in our firm IC, right, in the investment committee. I mean, I think, like, when we invested in a bridge, they were at 5,000,000 of ARR, and we were paying whatever it was, dollars $708,100,000,000 valuation. When we invested in Anthropic in that $15,000,000,000 round, I think they were at $100,000,000 like 150 times current ARR. Labora, 20,000,000 of ARR when we invested and led that $1,800,000,000 round. That's insane. And and if you're only looking at present and backwards, you'll say, Samir, do you not understand math? Like, a 100 times, that's what you're paying to get in? But if your view, as was mine in each of those instances, was that, yeah, but on an NTM basis, and that's what I care about, I'm looking at what do I think in the next twelve months this thing can be, and do I feel like this is a reasonable multiple in the next twelve months?