The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:21:26 · Harry Stebbings
[00:21:26] S1: When we look at, say, a legora of the world... I'm an investor. I always hold my hands up. I'm a big fan. You did it at 1,800,000,000. The legal market is 300,000,000,000 in The US. If we assume a 20% take for software and that is $60,000,000,000 and we assume that it's split up between a couple of different players, including your Harvey of the world, you can get to like 5 to 10,000,000,000 maybe in revenue. Is that how you thought about it? How do you get to a ten twenty x when you enter 2,000,000,000 on a company like Ligura? Help me.
00:22:00 · Sameer Dholakia
[00:22:00] S0: Well, I mean, that math not terribly off. I would just say we included the whole world because you and I both know Max, and he has global ambitions. And when you add in the rest of the world, by the way, you don't grow the tame a little bit. You add another 60%. You know, it's The US market is only 40% of it. But, yeah, I think that that math is is is not way off. I do believe you can get after the services dollars, I'll say, that go into into the legal market. It is, you know, the cliche that everybody keeps talking about Jevin's paradox. I do believe there's a lot of legal needs that don't get served today because the prices are too high. So I I just think there's... The... This market, when you just have... The way we thought about it very simplistically, I'll say is there's about a trillion dollars of legal services spend in the world When you're just thinking about this, that size of the TAM, I believe that they don't have to take any meaningful share of that to go build a massive business. And by the way, if they build a 5 to $10,000,000,000 revenue business, that thing is gonna be worth, you know, you put any multiple on that that is that is reasonable, and you're gonna make you're gonna make a very good return.
00:23:00 · Harry Stebbings, Sameer Dholakia
[00:23:00] S1: The thing that's interesting when you look at all markets today is the competitiveness has changed. Dude, when you were building, you know, SendGrid... You know, in no offense, there weren't that many competitors. There were there were several, but not the depth that we have today. And when we look at like a a Lagora and a Harvey, I'm gonna be unpopular. I think both will do very well. When we look at a fireworks, I think base 10 and modal will do well too. I think fireworks will win, which is why my money is there. Has the competitiveness changed in your mind? And does that shape how you think about investing and market outcomes? [00:23:34] S0: Look. I actually don't believe that the competitive breadth has changed. What's changed is the capital intensity behind the competition, and therefore, it leads to this competitive intensity. Right? Like, if you looked at the the war chest, the amounts of money that take a Lagora and Harvey have both raised, That leads to a competitive intensity that absolutely is different than than what I dealt with in my era. [00:23:59] S1: Is capital a moat today? Is that the differentiator?
00:23:59 · Harry Stebbings, Sameer Dholakia
[00:23:59] S1: Is capital a moat today? Is that the differentiator? [00:24:02] S0: I absolutely believe capital is a moat. I have always said that markets pick winners, and then it becomes a self fulfilling prophecy. Right? Like, our day, you know, SendGrid and Twilio were the API building blocks to to plug into your application to go send communications. And then once developers had decided that, it was game over. We had won. Like, that you you you were the default that you became the market winner. And that does happen, and we see it in in our... In these markets if we take that one as an example. There are lots of legal tech companies, lots of AI legal providers. But if you ask anybody at a big law firm who are the major legal AI companies, they would they would name those two. And so I do believe that the capital creates the... Both the ability to scale at an extraordinary pace and, therefore, a brand for those businesses, talent then ends up flocking. And then you just get this reinforced flywheel, then they win more customers, and then that just... You know, the virtuous cycle continues. [00:24:55] S1: Do you believe in king making? I do. To your point that if capital is a moat, excessive amounts in short amounts of time give inherent advantages. Do you agree in... With king making like I do or not?
00:24:55 · Harry Stebbings, Sameer Dholakia
[00:24:55] S1: Do you believe in king making? I do. To your point that if capital is a moat, excessive amounts in short amounts of time give inherent advantages. Do you agree in... With king making like I do or not? [00:25:08] S0: Yes. Because I believe everything you said, which is the capital is a moat, and it is a signal to the market. And having built software companies for a very long time, your product has to be exceptional. Your company leadership has to be excite... It's... I I would say in in, you know, in math speak, it's necessary but not sufficient. It is a necessary condition for you to win the market that you have the biggest war chest, that you have the most capital. I really do believe that you are in that kind of a game. And it's because the compute is so scarce, and therefore, the compute is so expensive that if you don't have that, you just can't play. So, yes, I agree with you at the first part of your statement, but it is not sufficient. You have to then deliver an amazing product that your customers rave about, love about, tell their friends about if you wanna be the king. Otherwise, you have no chance. [00:25:54] S1: So I agree with you completely there. And I also agree with what you said earlier, which is, like, you know, the 10 to 12 x and the the growth rates now are very different to what they were. When you look at what you're seeing today growth rate wise, is the triple triple double double that Sasta and me and Jason always talked about. Is that wrong? Is that not enough anymore?
00:25:54 · Harry Stebbings, Sameer Dholakia
[00:25:54] S1: So I agree with you completely there. And I also agree with what you said earlier, which is, like, you know, the 10 to 12 x and the the growth rates now are very different to what they were. When you look at what you're seeing today growth rate wise, is the triple triple double double that Sasta and me and Jason always talked about. Is that wrong? Is that not enough anymore? [00:26:14] S0: It is not enough to attract capital from venture capitalists who have opportunities to put them into these hyper growth companies that are growing much, much, much faster. You know, all of us as venture capital funds, your capital as big as these funds are, we just raised $5,750,000,000. It's still scarce capital. There are deals to be done at crazy hypergrowth rates. Now all that said, I do still believe in finding companies that are doing the t two, d three because the entry prices on those in this environment can be dramatically different, a very different multiple, and you can still make a great venture return on those. [00:26:51] S1: Do you buy that? Like, do you remember the the kind of ex... I call it the Excel deal. Do remember the Excel growth deals like the one pass words, the Qualtrics, where they found these kind of amazing assets in less obvious locations that were maybe more capital efficient? They then juice them up with some growth capital, and then it turns into an even better business. Do you believe those will exist in the next gen or actually not? You have to have that capital to get to the scale.