The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:05:00 · Sameer Dholakia
[00:05:00] S0: Man, when when you're in one of these, I I refer to it as, like, magic. Right? Like, I've been in software for thirty one years now. And the handful of other moments where I have felt magic, a trillion dollar super cycle followed every single time, and it doesn't happen very often. But, like, I mean, talk about lucky. I graduated college in 1995 back in the dark ages, but it was at the birth of the Internet, and I was graduating in the heart of Silicon Valley, and it was magic. You could just see how people could create content and share it with everybody on the planet. And you're like, this is magical. And, oh my gosh, we could actually do commerce on this thing, and I don't have to go somewhere to go get something. Like, that was magical. Right? And then and then later in my career, I can still remember. So VMware created this layer of software that disintermediated the the hardware from the from the OS and said, I can spin up virtual machines. I can put 10 of them on that one box. And by the way, you wanna see magic? I can move that running workload from over there on machine number two to machine number eight and shut the other one down whenever I want, and it won't interrupt the workload. Dude, that is magic. And I looked at that, and I was like, holy cow. I didn't appreciate that the super cycle it would create was called cloud, right, because there is no hyperscaler. There's no public cloud without the ability to do virtualization and motion VMs around up and and spin them up and spin them down, the elasticity of the cloud. And so every time I felt magic, I was like, holy cow. This is cool. I gotta go jump into that. And then this one, I remember I I started... I was actually on my sabbatical. I wasn't... I was in between Twilio. I thought I might be retiring, got bored. But, anyways, I was I was doing some advisory work, and this young guy, Dave Robenboser over at Jasper, said, hey. Can you spend some time with me and what we're building here? It's growing really fast. And I was like, yeah. Let's... I'd love to learn more about it. And he shows me a demo of Jasper that's this AI marketing app sitting on top of GPT three. Right? And this is, like, in the winter of twenty twenty one. And I was like, magic. It's again... This is magic. And sure enough, like, here we are now five years later, and it's been magical.
00:07:04 · Sameer Dholakia, Harry Stebbings
You just see these transformational technologies, and this one is bigger than the last two combined, in my humble opinion. [00:07:10] S1: Why do you say that? [00:07:11] S0: The analogy I often try to draw is intelligence is gonna be bigger as a market than oil because oil powers all the machines. Intelligence powers all the humans. Not some of the humans. All the humans. Consumers, prosumers, SMB, mid market, enterprise, government. I don't care who you are or what you are doing. You need more intelligence. And when you think about a market of that scale and scope, you understand this is magic, and it's gonna be really big. [00:07:38] S1: So if we actually go through the stack then, you did Anthropic. Let's start at the the heartbeat of intelligence that you mentioned there. Can you talk to me about the rationale, the underwriting, what you saw, what you didn't see when you look back now? [00:07:52] S0: Yeah. I mean, the most important bit, I'm really proud that we did it in the series d. [00:07:57] S1: What price was that, dude?
00:07:59 · Sameer Dholakia
[00:07:59] S0: I think it was 15,000,000,000 pre 18,000,000,000 post. It was early. It was the round that Menlo led and Lightspeed and and Bessemer joined. And and this is... By the way, we were talking about my legendary partner, Byron Dieter. Thank god for him because he and Matt Murphy go back a long ways, and Matt called up his buddy Byron and said, hey. We're looking to build the syndicate here for this startup named Anthropic. You should check it out. And Byron said, hey, Smiry, you wanna come look at this thing with me? And I was like, yeah. I'm all in on, as I said, on all the all the intelligence in the AI market. And I'll tell you, I think, you know, Byron and I grew up during the... Our careers probably centered during those cloud days. And so, you know, of course, we all pattern match. Like, you just kind of... You use these mental frameworks. So for us, I'll say for myself, maybe I won't speak for Byron. When I looked at it, I looked at it as, look. I think this market is gonna be a cloud redux was my was my analogy that in the cloud era, you had a handful of hyperscalers. There you had... You have AWS and Azure and GCP. And the reason is because it's massively capital intensive to build a cloud infrastructure. Well, it turns out that in in the market we were looking at here, it was going to be the same thing. It was massively compute intensive and therefore capital intensive. And so it's going to consolidate to a handful of players. But just like in the cloud era, we believe then, I still believe now, there would be hundreds of apps built on top of them. Just like you had hundreds of SaaS apps, You would have hundreds of AI apps that were purpose built for particular things. And so if you have that mental model, then you say, okay. Great. If it's really capital intensive, who are the people that have the balance sheet to actually go into the scaling laws that were being talked about? It's a pretty short list of of players who could actually afford it, and you went across them. And you're like, okay. Microsoft? Yep. They partnered with OpenAI. Google? Yep. They're gonna go build their own called Gemini. And then you got to AWS. And AWS at the time had an internal model, I think it was called Nova, that was not particularly distinctive. I'll be generous. And and they had just invested a very sizable amount of money into into Anthropic.
00:09:56 · Sameer Dholakia, Harry Stebbings
And by the way, at the time, it was very non obvious that, you know, Anthropic at the time was one of... I don't know. They're probably half a dozen or more other labs that were trying to to also build intelligence. [00:10:07] S1: Was it controversial in Basima? [00:10:11] S0: Harry, you have no idea. According to Byron, he said it was the lowest voted deal in the history of the firm of the time he had been there. But the fact that we were both, you know, there and had conviction, and one of the things I love about Bessemer is empowerment is one of the values of the place. And they're like, dude, that's where alpha comes from. If you guys really believe, go do it. [00:10:29] S1: What did you not see that you wish you had seen? [00:10:33] S0: I wish I had the ability to convince us all to do a bigger check that round. I feel like we saw it. We knew it, but there there are so many risks at that stage of the company. But we knew that the AWS relationship was pivotal, that it would provide both the compute for the training critically, and that was like the... It was really important, and then and then distribution at that early stage. And I just wish we had written a bigger check. That's all. That's all. I wish we knew that... We knew then that we didn't know now.
00:10:33 · Sameer Dholakia, Harry Stebbings
[00:10:33] S0: I wish I had the ability to convince us all to do a bigger check that round. I feel like we saw it. We knew it, but there there are so many risks at that stage of the company. But we knew that the AWS relationship was pivotal, that it would provide both the compute for the training critically, and that was like the... It was really important, and then and then distribution at that early stage. And I just wish we had written a bigger check. That's all. That's all. I wish we knew that... We knew then that we didn't know now. [00:11:03] S1: When we look at concerns today, one concern is the cost of intelligence shifts to open source because it's simply too expensive in frontier models. And we see that in a lot of data that's being produced by Vercel and Guillermo who publishes it. We're both big investors in fireworks, and so we both believe in open models too. To what extent do open models not deprecate the business model for the majority of frontier providers?
00:11:27 · Sameer Dholakia, Harry Stebbings
[00:11:27] S0: Look. I'm I'm a I'm a genius of and on this one versus the tyranny of the or. This... It is and not or here. As I I come back to my my comments about just the scale of the market for intelligence. We just can't get our heads around it. I mean, you think about this, like, Harry, when we invested, my bullish bull case was that we could get to some massive valuation. And and I'll just say that I missed the mark on how big of a of a business could be created at the frontier by factors. And so when you're in a market that big, predicting with any precision the mix between closed tokens and open tokens is irrelevant. You just... It's gonna be big. You're in... You... Right? Do you understand what I'm saying? Like, when it's that large of a market, the ratio is actually not not not a concern. And and I really do believe that there are all those different use cases from consumers up through enterprise and government, and they're all gonna want intelligence of different types and different flavors. And that is why we're both... We're investors in both on Anthropic and and in fireworks and the closed tokens and the open tokens. We'll get... We'll have exposure as a as a fund and as a firm to both, but I think both are gonna be huge. [00:12:35] S1: Do you think US enterprises are willing to use open source Chinese models? [00:12:40] S0: I think that once that Chinese model is hosted by Fireworks, it's no longer a Chinese model first.