The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
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.
00:26:51 · Harry Stebbings, Sameer Dholakia
[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. [00:27:15] S0: I think that over time, we'll see a bunch of application companies that can look like what you just described. I just don't think that that's where the venture dollars are gonna flow in the near term. When you have opportunities to invest in things that are 10 x ing at scale and your opportunity is something that's doubling, of course, you're gonna go to the TEDx ing, not just like an intelligence test. [00:27:34] S1: We call it cake or death. Yeah. You ever seen Eddie Izzard? He goes, cake or death? And you go, cake, please. Cake? Wow. What a surprise. I wasn't expecting that. [00:27:46] S0: What a tough question. I... So I I... But all that said, like, do I think we can make money investing in companies that are t two, d three? Absolutely. You can. And so then it comes a little bit of a of a mixed question. Like, how many... How much do you wanna have in one versus the other? You know?
00:27:46 · Sameer Dholakia, Harry Stebbings
[00:27:46] S0: What a tough question. I... So I I... But all that said, like, do I think we can make money investing in companies that are t two, d three? Absolutely. You can. And so then it comes a little bit of a of a mixed question. Like, how many... How much do you wanna have in one versus the other? You know? [00:28:00] S1: So you mentioned the $5,750,000,000. It's quite a lot, to be honest. Let's just let's just... Let's start with the $1,750,000,000 seed and early Seed and early. Do you need a billion dollars to do seed today? We just saw literally earlier today, USV announced their $900,000,000 funds. Do you need a billion to do seed? [00:28:23] S0: Seeing the prices that I'm seeing, valuations we are seeing for the early stage deals coming in for my teammates on the early stage side, if you just think about the number of shots on goal you need to have to find the winner, I don't know how you would have a small seed fund and be successful. I don't. [00:28:39] S1: What are you seeing in that pricing and ownership level?
00:28:39 · Harry Stebbings, Sameer Dholakia
[00:28:39] S1: What are you seeing in that pricing and ownership level? [00:28:42] S0: Depending on the business. If it is a capital compute intensive business, and a lot of these AI businesses are that. Right? So it also depends a little bit on where you want to play. Where in the stack do you want to play? How capital intensive of a business do you want to invest in? If you're like, hey, I don't need to invest in, I don't know, something that requires hardware or robotics, or I don't want to invest in something that's like training a model for compute, maybe there are places where where you don't need that capital intensity. But I just think in this era of intelligence and AI, I just... I think a lot of them do. And so if you assume that that's the case, man, the math math just won't math for the for the entrepreneur or you if you're not paying what... You know, in my day, look, I've been doing this for... You know, I've been in software for thirty one years. Like, a seed check-in the day was, like, 3 to $5,000,000 on a 20 to $40,000,000 valuation. Like, you know, it's a dramatically different time. [00:29:34] S1: And what is it today?
00:29:35 · Sameer Dholakia
[00:29:35] S0: I don't have the specific numbers, but I know that it's factors higher. That I know. It's it's way more. And and when when you're factors higher off of that, you really gotta hope that you're a great picker. And this is where I get into my... One of my other kind of worldviews, if you will. I'm just a biz... Just a humble business guy, Harry. And I think about the venture industry like any other industry. And so to me, when I was evaluating coming starting it as a second career, I looked at the venture capital asset class, and I said, this looks nothing like what I grew up with in the mid late nineties, where everything was hardware, software in Silicon Valley and principally early stage. And now it is global, every sector you could imagine, and everything from a pre seed check through up into IPO where you're investing hundreds of millions of dollars. Every one of the vectors that I just mentioned of location, stage, and sector are dramatically different and broader. It's just the professionalization of this asset class. And so if you think of it in that context, you're like, okay. Well, in most industries, when they professionalize and they get to scale, you either have to be on this end of the spectrum, which is a giant global platform that consolidates a whole bunch over here, or you need to be an extreme specialist over here that is doing fill in the blank. You know, I'm doing AI deals in San Francisco early stage. Right? You gotta optimize specialty on all three dimensions. You could be one of those two. And if you're in between, good luck. I I think that's a rough place to be. I really do. And it's the reason that Bessemer is going... You know, we have... I think Bessemer is a is a big global platform. But, man, I tell you, like, not being a giant global platform or an incredible specialist who can add differentiated value and be better at picking because you are a specialist, I think it's a hard world to make money.
00:31:18 · Harry Stebbings, Sameer Dholakia
[00:31:18] S1: So what happens to the billion dollar funds? [00:31:21] S0: I don't know, but I'm glad I'm not that one of them. [00:31:23] S1: I'll tell you that. I think [00:31:26] S0: you have to be on either end. I really do. I really do. And look, you can... Yeah. I mean, I'm sure there's a path to success for everybody. Good luck. I just... You're... I'm just giving you my outside in, unvarnished view just as a business guy looking at an industry. You know, I'm I'm just analyzing it clinically, and I'm telling you what... That's what I've seen in the history of business is when markets get big, they consolidate, and they have special... I mean, you take, like, automotive. It doesn't matter what industry you pick. There will be, you know, your big three in The US or, you know, the Toyota Hondas in Japan. Like, you get a handful of giant players on one end, and then you can be like, I am a Porsche or a Ferrari or a specialty player on the other side of the spectrum. But being in the middle is a tough place to be, I think. [00:32:09] S1: It is. I think it's a very tough place to be. Can I ask you when you look at the two different vehicles today? I had Venky from Manolo on the show, mutual friend of ours. [00:32:18] S0: Yeah. Love Venky.