The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:28:52 · Jason Lemkin
[00:28:52] S2: Well, we we will. And I will... I'll be honest to the team. It's a... This is risky one. I am impressed with what Muse has done. And if we had to compete head on with Meta and that was the only thing, we'd be in trouble. I would not recommend this investment because we can't compete with their servers. We can't compete with the GM. They can't compete with the LLM. However, after having done several reference calls and over a dozen synthetic ones on Claude, I've learned a couple of things. First of all, Meta cannot go cross platform. It cannot go in. It does own WhatsApp, which is a real threat. It won't be worked with all carriers. It won't work across all services. It won't work across. It's highly focused on its own platforms. And so that is only a subset of how we communicate. How many folks between the ages of 18 and 55 are on Facebook all day? Very few, right? It's really your grandmother's application. Now WhatsApp is popular and Instagram, but the fact that it is not going to be interoperable across all these different services means it's got a fairly limited reach. Two, how long will Meta maintain the energy here? Right? When this produces essentially trivial to no revenue. Anyone remember Workplace? Workplace in its own way was probably better than Slack for folks that lived in Facebook. It was probably better. It had a lot of neat use cases. It worked well. It was architected and it was actually the highest NPS of any product in the entire Facebook Meta platform, but they couldn't maintain the energy. My reference checks say when Alex leaves scale, this product will fall apart. If this was the only thing that Meta had to do I wouldn't bet against him, but we're just not going to see the commitment to do the kind of things the Instinct team is going to do. And let me tell you this is one of the greatest teams I've seen in my history of investing. They're great. These kids come and they play World of Warcraft in real time during the pitch. They're top 10 each all... They're both top 15 on league. I recommend leading the round but being cautious with reserves because the next round valuation may hit into realistic IPO limits. So you would do this round? I wouldn't. You asked me to do it. There's no effing way I would do this round.
00:30:51 · Rory O'Driscoll
[00:30:51] S1: Okay. Good. Okay.
00:30:53 · Jason Lemkin
[00:30:53] S2: We've Here's gotta use the whole why I wouldn't do the round. Okay? And you can call me a fuddy duddy for it. Okay? I believe most of that. Okay? For the pitch. I just believe the infra costs here are so high and the incumbents... This is like if... We've been talking since this show started. What if Claude... What if Anthropic and OpenAI actually built apps? And in the higher history of this show, they've only built outside of Codex and Clodco they've really only built half an app. Cloddesign which isn't even really fully an app, okay? Here's Meta building the app. They have the LLM. They have the cost advantages. They have the speed advantages. They have more available compute and GPU in all of it than anybody else in the world and they're building the app. This is the threat that every VC worried about and we all got a hall pass since the start of AI because the LMs didn't build any apps. This is the one that they're building I just don't want to compete against this because I do think for the next twenty four months it's a big priority and it's just Harry already said instinct is slow that's a sign that's a sign of compute costs of other that's why they have to raise a billion and can they subsidize with venture capital 5 to $10 per user per month sure but if they have to over monetize it what if they become poolside they could become the next poolside like it's great but literally I've got 10,000,000 users at $10 a month. Now I've got a $1,200,000,000 nut a year to pay off. I'm struggling to raise the next round. I'm not Databricks. So it's just I worry when the incumbent has infinite all the capabilities here and wants to build the app. That's why I would say, no, but I might be wrong. Right? I I might I might be wrong. I wouldn't bang my fist on the table at the at the meetings.
00:32:27 · Rory O'Driscoll, Jason Lemkin
[00:32:27] S1: I I'm trying to remember was it Socrates, or who was it? One of the ancient Greek philosophers where you could literally say, take one side of the argument, and then halfway through you could say, Now take the other side of the argument, and Jason clearly can do that here. Was a perfect This is why you should write [00:32:42] S2: Harry, put me on the spot. I don't
00:32:44 · Rory O'Driscoll
[00:32:44] S1: want I'm to do this impressed with the mental facility with which you can do both sides. It's terrifying. It's like a human LLM. You can be convincing on whatever you want me to do. Pulling them both together, I actually think... And I want to take the post out on that. It's in... What you basically said is this is core to Meta, and it feels like something that they would want to do. And despite your comments on cross platform, today, Muse is a stand alone app, so it's not a cross platform issue. But to the extent that they fold it into... I've I've just got to assume they're gonna make it accessible in Messenger, make it accessible on iMessage, etcetera. But it seems to me if there was one thing that Meta should do within the world of AI, it would be this. It's hard to imagine spending 100,000,000,000 plus on AI, saying that we're going to build the personal AI and then not putting all your effort on this. So I agree with you, Jason. I think this has to be an all in meta bet in a way that frankly, I reject the comparison with Slack. The Facebook for work product was like a toy. It was not a core issue to them. This is a core issue. I So think you're right. They go for hook, line and sinker. Now, the interesting thing about the poolside analogy and instinct is you could have the same outcome here, which is poolside said we ran out of capital to keep playing, but we had an excellent outcome because there was a company with an even bigger market cap who wanted the assets that Pool Hideside has assembled. NVIDIA wanted access to the model, access to the talent. I mean, let's put it out here. The same thing could happen here, which is that instinct executes, build a huge user base, OpenAI steps up and says... It's interesting, I think that the founder of Instinct either worked at Sierra or Brett Taylor is a big fan of, and Brett Taylor obviously among the many other things that man does, the chairman of OpenAI. It may well be that Instinct builds a lot of traction, doesn't have a cash flow positive IPO potential, but has a very attractive upside exit. I don't discount that. Maybe 10,000,000,000 is a little lofty, but you gotta believe if if it got meaningful, differentiated attraction, that it would be interesting to someone who wants to build a business in this space.
00:34:52 · Harry Stebbings, Jason Lemkin
[00:34:52] S0: The only thing I will say that Noah Shinn, the founder of Instinct, from every single person I've spoken to, they cite him as one of the most generational talents. And in a world where generational talents in strategically attractive segments are very acquisitive to multi trillion dollar. Can see that being a very legitimate upside scenario case for 50 to 60,000,000,000, as crazy as it sounds. [00:35:17] S2: It's possible. Listen, we all have different experiences. The way I was raised to invest in venture was don't take bets that 100% require an M and A outcome to be successful. Right. They're just too they're just too unpredictable. I've been on the other side and know how capricious. You could be Clem's best friend. He brings you in to meet with Jensen and then he quits the next day. Right. You literally just can't predict it. You need some real something to steal to make a bet where an arbitrary super high value outcome is the only plausible exit. I'm not saying it's not a bet. Like, is definitely a bet. Right? It's just... It's a big one.