The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:19:39 · David Morehead, Harry Stebbings
[00:19:39] S0: I mean, that's not us. Right? Like, that's managers. [00:19:42] S1: David, for goodness sake, will you please learn from your managers? Okay? Lesson number one of Wench Capital. Even if it was not you, you take credit and say thank you so much. I remember that one. Yes. [00:19:54] S0: That's not really how we roll at Baylor, but understood. [00:19:58] S1: Can I ask you? It's a really different... And I'm not saying with Anthropic here, but I'm saying with positions that go public, Anthropic obviously will be one. But with positions that go public in the past, how do you think about the I'm gonna actively manage it as now the holder versus a common one that I hear, which is that's not our job. We just liquidate the minute that we get it because we don't know about this asset. How do you think about it? [00:20:21] S0: It'll depend on what we think about the name, and it'll also depend about the size of the position once it is public. So we've sold, you know, shares before. We've also had shares before. We've also let shares run before. So it kind of depends to us what we're expecting, what the profile of the portfolio looks like, and the position and the risk associated with it. [00:20:46] S1: I was talking to Sean before this show, who you mentioned we should chat to. He's brilliant, Sean Barris. And he said that you think more like Charlie Munger than anyone he's ever met. Now was that... I had it written [00:20:57] S0: Because we're in the middle of the country, I think. And
00:20:57 · David Morehead, Harry Stebbings
[00:20:57] S0: Because we're in the middle of the country, I think. And [00:21:03] S1: he said that when software was getting killed early in 2026, you went deep on the situation, wanting to understand every bit of research and then piled in. Can you talk to me about that, your process there, what you saw that others didn't, and how you thought about that? I'm just fascinated given that.
00:21:19 · David Morehead
[00:21:19] S0: I would say, like, if we had an edge, I would say that we're pretty good on human behavior. And so a lot of these things, you know, I don't dispute at all. Like I'm not an engineer. Much of the stuff that comes out of Silicon Valley is over my head. But I do know how people think and I do know how people make decisions. And so it was pretty easy in this case of, you know, like software is dead, it's all going to zero. Somebody's gonna vibe code this and whatever. And like, have friends that run three, 500 person private family businesses. And it's easy enough to pick up the phone and call them. We're like, hey, say your son-in-law vibe code something and you're gonna like tear out your CRM. And they're like, not in a million years. It's not their job. Like I have a good friend who runs like a vertically integrated like potpourri business. He knows everything that there is to know about that, but he is not going to tear out key important parts of what makes his business run behind the scenes on some unproven thing that I think it was the CEO of Salesforce, like, I don't know, six or eight months ago said that like the best that AI was gonna be is like 93%, right? Which is like phenomenal, and that might be like better than like a lot of people, but the issue is software is a 100% right. So if you need your books to like match up and whatever, like, yeah, that's not gonna happen. So I actually think as we've kind of like thought about it more, I actually think that in some of these vertical industries, that software is actually gonna be the delivery mechanism for AI. That in other words, for my friend who's in like a niche business, very, very good at what they do, I think they're the only vertically integrated potpourri maker in the world. I think that what's going to happen is that the trust that's been built up with the software providers is going to translate into, hey, could you add AI bits for me on the back of this software? And of course, like the SaaS companies aren't stupid. It's not like they're sitting there like, hey, we're worth 20 or $50,000,000,000 We should let this go to zero.
00:23:29 · Harry Stebbings, David Morehead
[00:23:29] S1: What's interesting for me is you analyze this situation and then you decide to act on it. Like this is very rare for an institution to normal. [00:23:39] S0: Sean and others have like told me that, but like that I don't actually understand, right? Because like software at that point is like on sale to the tune of like 50, 60% from like October '25. And if the thesis is software is going away, it's down 50, 60%, you call businesses and they say that's not true. You're like, I'll own that. [00:24:00] S1: I get you, but it's throwing the baby out with the bathwater. The trouble is I'm not sure what's the baby and I'm not sure what's the bathwater. And with the greatest of respects, I live in technology. [00:24:11] S0: And that's why we have managers like Sean. Right? So he's the expert. So I'm like, I'm gonna give you more money, but I want you to go through your list with me and tell me all those things that are least likely to be interdicted by AI, and then like own those. So I'm making a decision based on human behavior and how I know people make decisions, right? And I'm allocating based on that, But I'm relying on the manager to be expert in their individual field and give me the correct perspective and what's going on on the ground. [00:24:43] S1: But what's so interesting is most just delegate to managers and go, you're the experts. You delegate to them great. And then you go, I'm also gonna operate where I have decisions myself, and I'm gonna interject in those markets. It's different.
00:24:43 · Harry Stebbings, David Morehead
[00:24:43] S1: But what's so interesting is most just delegate to managers and go, you're the experts. You delegate to them great. And then you go, I'm also gonna operate where I have decisions myself, and I'm gonna interject in those markets. It's different. [00:24:57] S0: But I kinda think that that's our job. Right? I mean, like, my seat is like an allocator seat. My job is to allocate. To go back to the like the Buffett or Charlie example, right? They also are allocators and they're deciding who gets the incremental dollars. Do they send it to Burlington Northern or do they send it to their energy company? And depending on what the outlook is, what the CapEx requirements are, etcetera, they get budgets submitted to them and they may or may not allocate more of their cash pile to those companies. [00:25:29] S1: Quite a lot of LPs that I speak to say, I get the liquidity challenge of venture, and I get the time lags of venture being difficult. But I learn a lot from what happens in my venture portfolios in terms of AI penetration, new technologies, adoption cycles. Is your venture portfolio a learning academy for you or not?
00:25:29 · Harry Stebbings, David Morehead
[00:25:29] S1: Quite a lot of LPs that I speak to say, I get the liquidity challenge of venture, and I get the time lags of venture being difficult. But I learn a lot from what happens in my venture portfolios in terms of AI penetration, new technologies, adoption cycles. Is your venture portfolio a learning academy for you or not? [00:25:50] S0: Not for me. I would say it goes the other way. I actually learn a lot from the public side managers. What I find is that there's a lot of this spun up, like, oh my gosh. We're gonna have autonomous cars in, like, three years in 2016. Yeah. Right. Like, all the regulatory stuff that you have to go through so that you don't kill somebody. Yeah. We're ten years on, and what do we have? Like, 5,000 cars on the road? Like, please. So, like, I get sort of, like, the mental imagination that, you know, you can go, like, we could put something on the moon and we could mine the moon and whatever. Yeah. Okay. Like, get back to me in thirty years. [00:26:28] S1: Okay. But you're not worried then about the casinoization of public markets? [00:26:32] S0: No. The public markets are the big leagues. There's millions of people making decisions on dollars every single day for every single company. You know how things get valued on the private side? Of course you do. Three people get in a room and say, hey, I think the value is x. And they're like, I'll fund it at that. Great. And that resets the whole price.