The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:27:14 · Brendan Foody
[00:27:14] S0: Well, I would say maybe I'll give it from Merkur's perspective, and then I'll give it from the lab's perspective. We tend to be now so good at mobilizing experts that we're able to access pretty much any domain. There's always going to be some degree of like these niche pockets of oncologists or whatever it is that have a particular background, but generally we can fill those fairly quickly. And it's more about people that actually are very acclimated to the frontier of AI, because it's the people that both have the expertise in oncology, but also are power users of ChatGPT or Claude that are able to find where the model makes mistakes and help the model learn from those mistakes. And so that's from the Merkor perspective. From the perspective of the labs, it seems like it's all encompassing. It's just like the barrier to automating everything that you can do in say Google Workspace is how do we cover the full distribution of all of the context, I. E. Messages, Slacks, Slides, Excel sheets, and all the tasks, prompts and outputs that correspond to everything that you do in your job. And that applies to every individual and every domain throughout the economy. And so there's this enormous mobilization of hundreds of thousands and soon millions of people to build out the full distribution of everything that you could pass into Google Workspace and everything that you could want out on the other side in every job category throughout the economy. Before we dive into a tweet that
00:28:48 · Harry Stebbings, Brendan Foody
[00:28:48] S1: you did, which slightly terrified me, to be quite honest. So you said like 30 to 40% is kind of how [00:28:53] S0: we think about like our revenues from that? Generally, yeah. [00:28:56] S1: Okay. So if we take the the rounds that we've raised, which round felt most uncomfortably high? Good question. Well, so [00:29:04] S0: I'll talk through the valuations of each, of the revenue of each. So our seed round... Did Phantom not fly you in the chopper? That was serious ice. So our seed round was in September 2023, we were at called a million in revenue run rate, or just shy of that, and I initially didn't wanna raise because I wanted to bootstrap the company, but Adarshan Suriya's condition on dropping out was that we needed to raise money, and so we met General Catalyst eight a. M. On a Sunday morning. They gave us a term sheet within thirty six hours for $2,300,000,000 at a $23,000,000 post money valuation. [00:29:40] S1: Pretty [00:29:40] S0: gross. So that was pretty reasonable insofar as price And this was was Max [00:29:44] S1: and him on?
00:29:44 · Harry Stebbings, Brendan Foody
[00:29:44] S1: and him on? [00:29:45] S0: This was Max and Nico. And then at our Series A, the business didn't grow that much from the seed to the Series A, but we found the market was a key differentiation. And we met Victor when we were at, call it, 1,500,000 in revenue run rate in May 2024. And Victor got super excited. Initially, I refused to take a second meeting, but then he said, Oh, have you ever been in a helicopter? And so Peter took us on the helicopter flight and Benchmark really wanted to work with us. And so by the time that they gave us a term sheet, were at, call it, 2,500,000 in revenue and they gave us $250,000,000 post money valuation. Did that feel uncomfortable? [00:30:25] S1: Because that's a big jump, 02/23 post to $2.50. [00:30:28] S0: So keep in mind, the time, this sounds crazy because we were at 2,500,000 in revenue, but I was projecting 50,000,000 in revenue run rate by the end of the year and 500,000,000 by the end of next year. And so it felt [00:30:40] S1: like a bargain. Dude, you do know all founders project that day, [00:30:45] S0: we in the never the project. Sure. [00:30:47] S1: It just doesn't happen often. Yeah, yeah, yeah.
00:30:47 · Harry Stebbings, Brendan Foody
[00:30:47] S1: It just doesn't happen often. Yeah, yeah, yeah. [00:30:49] S0: And then four months later, we met Felisa's, and we never would make a slide deck or take investor meetings. And so Lisa sent us an email saying, Hey, we know your co founder, Surya, really likes Ferraris. Do you want to go racing Ferraris with us? Then I replied and I said, You caught my eye. Tell me more. And they said, We'll meet at the airport in Hayward and go on Aiden's private jet to Las Vegas to race Ferraris around F1 track. And so I was like, We're available in three weeks on a Sunday. And so we do this. We race Ferraris. We're at $20,000,000 in revenue. They ask us what valuation do we think makes most sense? And I say $1 to $2,000,000,000 So they give us a term sheet at a $2,000,000,000 valuation. And at the time, that's 100 times revenue. And everyone thinks that that's a high valuation. Meanwhile, was an incredible investment. [00:31:41] S1: So I'm gonna be honest, this is when I interviewed Adash at that time. And at the end, I was like, dude, I would love to invest. Please let me invest. And you very kindly let me put a small check-in. And I then spoke to several of the biggest investors in the world. And no offense, they chuckled at me like, Dude, that was such a high price. It's such a high price. Well, so here's
00:31:41 · Harry Stebbings, Brendan Foody
[00:31:41] S1: So I'm gonna be honest, this is when I interviewed Adash at that time. And at the end, I was like, dude, I would love to invest. Please let me invest. And you very kindly let me put a small check-in. And I then spoke to several of the biggest investors in the world. And no offense, they chuckled at me like, Dude, that was such a high price. It's such a high price. Well, so here's [00:31:59] S0: the thing is, we'd been growing 50% month over month for the prior six months, and I think what none of them really realized was that it would continue for the subsequent twelve plus months. And so then that compounded more and more by September 2025, or say October, were at call it 400,000,000 in revenue run rate. And then Felisa was like, We want to invest more. And so they gave us a term sheet at a $10,000,000,000 valuation. We didn't really want to spend much time on a financing because the business was growing 50% month over month, and so we were very preoccupied. And so that was about 25 times, and the business has almost 4x since then. [00:32:37] S1: So review, which one felt most uncomfortable?
00:32:37 · Harry Stebbings, Brendan Foody
[00:32:37] S1: So review, which one felt most uncomfortable? [00:32:40] S0: If I had to choose any, the Series B priced in the most, the furthest ahead of our growth, or that or the Series A. Think it was probably the series B, because both were 100 times revenue, but it's very different to be 100 times revenue when you're at $2,500,000 in revenue versus $20,000,000 in revenue. So that was probably the largest one, but obviously both were great investments in hindsight. What is the next round then? We'll see. Probably a much higher valuation. We're getting a lot of offers at meaningfully higher valuations, but the company is fairly profitable, and so we're taking our time to see who the right is. [00:33:15] S1: We're also just going through modes of transport, aren't we? We had the Chopper, we had the Ferraris, we've had That's [00:33:20] S0: a good observation. Should get [00:33:22] S1: a warship now to get the Series D. [00:33:24] S0: Yeah. I totally agree. I've never been on a warship before, but that sounds a lot of fun. [00:33:28] S1: There you go. Sequoia line up the warship. The next twelve months will be dramatically better for infrastructure companies upstream of Anthropic and OpenAI than for application layer companies downstream of them. This was your tweet.