The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:17:51 · Parag Agrawal
[00:17:51] S0: I think today we don't know how to pay for unique valuable insight or data. Because as intelligence is cheaper, you're going to want to build upon either data or insight that comes from somewhere else with your unique data. Right? So what... Like, if you think of like an abstract notion that, okay, I have intelligence here. I want some data. You want some data and there's some data in the public domain. If we can pull together your insights and my insights and all of this data in the public domain and intelligence on top, we can create something bigger than what you could have done by yourself, what I could have done by myself. So now how do you transact to create this sort of whole that is bigger than the sum of what you could have done yourself and what I could have done or what OpenData was good at. And so that transaction feels like a data transaction to me or an inside transaction to me. And so we don't yet know how to transact that way. So we fall down to, okay, all I can do is use my data and use OpenData and let's see what I can do with it. But if we figured out better ways of pricing data and good things will happen, but it's not something that's yet a market. But what I'm talking about is data transactions at inference time. So it's not necessarily training time. We are building knowledge. Let's let's take an example of today's world, for example. Let's say in your job since I'm sitting with the VC, you probably have access to a pitch book or like a product like that to collect data. And so you you get grounded in knowledge of what's happening and you get to use that data to figure out how to make decisions in addition to all the the notes you have and deal memos you've written perhaps over the years or insights you've had about, like, how to choose founders. And you're essentially composing insights from your personal lived experience, your notes, public data to make decisions. Now you pay PitchBook by the seat, but now you're running a bunch of agents. And your agents can perhaps not access everything you can on PitchBook. All you're doing, like, sort of this to get a browser, perhaps against terms of service to send agent via browser to PitchBook using your auth credentials. And it's inefficient. Inefficient. It's clunky. Right? But clearly, their data is valuable. And clearly, your agent should have convenient access to it.
00:20:08 · Parag Agrawal, Harry Stebbings
So if we figure out how valuable pitch book data is for your agents to make your decisions, because Because, clearly, you're investing a large hundreds of millions of dollars. So, clearly, you presume that you make a great return on that. So this data is truly valuable if you depend on it today. So you should be able to figure out how to compensate PitchBook for the data even when agents use it, which is not by the seat. If we figure that out, it'll be a huge market and agents will be better off. If we don't figure it out, you're gonna be in this weird cat and mouse game. Off. PitchBook being like, no. I wanna sell you a seat. I'm gonna shut it off. And your agent is stuck without the data, and then, like, you're involved in, like, pulling data. [00:20:51] S1: I think every big company has the choice today of do we let agents in or do we keep them out? And Amazon has said, I'm sorry. In most recent times, Muse, you will not be let into our garden. Shopify has said, come in, baby. Expedia said, come in. How does this play out?
00:21:08 · Parag Agrawal
[00:21:08] S0: I think eventually, everyone has to let them in. The question is on what terms? So how do you align incentives for everyone? And people are gonna have to play their strategy games on how they win in this new world. Literally, the customer is changing in front of our eyes. Right? Like, the customer used to be a human. You're building products for humans. Now you're building products for agents. All you're building agents. And so now you have to figure out what your place in this new reality will be. I don't know if there's a right or wrong answer here. It also depends on sort of how much market power you have. Do you think Amazon were right to say no to Muse? Depends on what they do next with it. If it turns out that they have sufficient market power to have Muse or other agents connect to them differently perhaps over time or ship their own agent and drive crazy adoption. Let's say they have that capability, then I guess they were right. Right? On the other hand, once they've made this, they're not gonna allow anyone else's agent And they cannot ship an agent that consumers use, and they won't allow anyone else's agent to use them. And a lot of the transaction economy starts moving off of to agents, which are all big ifs, by the way, then it would be a bad move. Now I'm betting on agents. I have mixed feelings around agents and what fraction of ecommerce transactions they do. Like, it's unclear. Right? Like, it's...
00:22:26 · Harry Stebbings, Parag Agrawal
[00:22:26] S1: I... Do you think it's unclear? I think it's unwaveringly clear. Maybe I'm super early on the adoption curve, and I buy everything through instinct now. Other than holidays and a home Yep. I'm literally just everything through instinct. Mhmm. [00:22:39] S0: So so me too. But I also know a lot of people who like to buy things themselves. And, like, listen, we want to delegate to agents things which we see as chores and uninteresting and not delegate to agents things that give us joy or pleasure or make us have fun doing those things. And I know people who don't want to delegate shopping. They wanna delegate a lot of things in their life. They don't wanna delegate shopping. And so that's why I don't know the distribution of these people and how behavior changes, but it might be people give away a lot of other chores and then spend a lot [00:23:09] S1: of time shopping. One thing that does worry me is actually the dissolution of the advertising industry in the wake of agents. If I have... You know, if I order my delivery and my Uber, DoorDash for our dear American counterparts through Instinct, that Uber banner that's now advertising something becomes worthless. Amazon, their advertising business is bigger than their e com business now. Of course, they're shutting it off because if agent's the primary customer, your ads business goes to next to nothing. Correct.
00:23:09 · Harry Stebbings, Parag Agrawal
[00:23:09] S1: of time shopping. One thing that does worry me is actually the dissolution of the advertising industry in the wake of agents. If I have... You know, if I order my delivery and my Uber, DoorDash for our dear American counterparts through Instinct, that Uber banner that's now advertising something becomes worthless. Amazon, their advertising business is bigger than their e com business now. Of course, they're shutting it off because if agent's the primary customer, your ads business goes to next to nothing. Correct. [00:23:39] S0: And this is not just... You're talking about this in the e commerce line, right? But this is what I meant early on when I said like the business models have to change. Ads don't work with agents in their current form. Forgetting e commerce for a second, if you think of you're in the content business, let's say your page, which is ad supported public information on the web, ad supported page, people show up, you show them ads, you make money, great content. Agents show up, no one sees ads, you make no money, which is why we like to pay people. So we're effectively building an AdSense for agents showing up to read your content. So we like to pay content owners a variable amount of money every time an agent derives benefit from reading their information, which is a variable amount of money is what a visitor to your website will pay you based on a click probability or a value probability on ads. Why do you do that? To incentive align content owners. Otherwise, what's
00:23:39 · Parag Agrawal, Harry Stebbings
[00:23:39] S0: And this is not just... You're talking about this in the e commerce line, right? But this is what I meant early on when I said like the business models have to change. Ads don't work with agents in their current form. Forgetting e commerce for a second, if you think of you're in the content business, let's say your page, which is ad supported public information on the web, ad supported page, people show up, you show them ads, you make money, great content. Agents show up, no one sees ads, you make no money, which is why we like to pay people. So we're effectively building an AdSense for agents showing up to read your content. So we like to pay content owners a variable amount of money every time an agent derives benefit from reading their information, which is a variable amount of money is what a visitor to your website will pay you based on a click probability or a value probability on ads. Why do you do that? To incentive align content owners. Otherwise, what's [00:24:28] S1: gonna happen? Everyone's gonna block agents. So you you need to find a replacement to the ads business model. I get you, but you have to assume that you're gonna be, like, a 100% of the market then. Because if you're 30, 40% of the market and you're like, oh, don't worry. We'll pay you. And New York Times is still like, well, thanks, Parag, but 60% of my traffic is still unpaid. So I'm just gonna block all of