The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
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.
00:32:18 · Sameer Dholakia, Harry Stebbings
[00:32:18] S0: Yeah. Love Venky. [00:32:19] S1: Yeah. He got some stick for saying that early stage and seed investments were option bets, and you build a portfolio option bet. Yeah. It's hard not to have seen that. I think we're at about 5,000,000 views. But he's by definition right. If you have the majority of your dollars at late stage, by nature of doing early stage, unless you said I'm deliberately not going to invest in anything that I do early, which would be utterly moronic and irrational, it by nature has to be an option.
00:32:49 · Sameer Dholakia, Harry Stebbings
[00:32:49] S0: I think having been on both sides of the operator and venture thing, I think what people were taking umbrage with was the notion that... Maybe maybe this is what they're... I don't know. Was that the... I'm an entrepreneur of a small thing. I don't wanna just be an option. I know Venky well. I know him personally. He's a great dude. They're a great firm. That is not what he meant. But what he meant intellectually is a 100% correct. It is an option. And if it works, then I'm gonna put more capital behind it. I mean, anybody in venture capital, I believe, that listened to that or thought through that understands that to be a truism. And I think there may have been a little bit of a flack on the... Maybe on the the human entrepreneurs that are doing the hard work of trying to build these things, and I don't wanna just be an option. But I... Actually, I would I would challenge those entrepreneurs having been one myself, and I would say, no, man. Like, understand that your business, you have to earn the right to keep scaling, to earn the right to the next round, to get more capital, to keep building towards your dream. That is the game. And, if you're... If you don't think that is true, you're not understanding the game. [00:33:48] S1: Can you help me understand? I totally agree. When when you have the 1.75, does that have reserves baked in, or is the idea that you have no reserves there and then you double down from the 4,000,000,000, which is growth?
00:33:48 · Harry Stebbings, Sameer Dholakia
[00:33:48] S1: Can you help me understand? I totally agree. When when you have the 1.75, does that have reserves baked in, or is the idea that you have no reserves there and then you double down from the 4,000,000,000, which is growth? [00:33:59] S0: Both. We we absolutely have reserves baked in to the 1.75, but we don't want to just be, like, doing pro rata checks. Like, in the companies that we believe are taken off, we want to back up the truck as we've done, like we just announced around with Elise AI where, you know, we were gonna be investing nearly $200,000,000 that we just announced. And and so, like, when we see the winners that we think are in big markets are gonna build great companies, like, we're like, yep. Let's go. [00:34:22] S1: What does that look like then, that interplay? And do you worry about the signaling risk of, like, Samir jumping all over one company and not another company?