The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
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.
00:35:50 · Rory O'Driscoll, Jason Lemkin, Harry Stebbings
[00:35:50] S1: And and just to come back on that, because I've been thinking about the EUI, it's not what I do either, but I look at this and I do... You know, you always question yourself, is there anything you can learn? There is an argument. I'm not yet making it, but I'm just acknowledging that the expected value of a number of those bets could be strongly positive. Admittedly, the variance is high. In other words, it's a risky way to make money. You should ask yourself as you're building a portfolio of 30 bets, is it okay to have three of those bets in your portfolio? Probably another 10,000,000,000, but you're right. It wasn't reckless. I think Kleiner did the round at 500, Mahmoon's overshrewed. It's not reckless to do around at 500, even if you believe the expect... The profile, the payout profile is two in 10 chance of a 20 x positive multiple. And if you don't get the positive multiple, you're going to build a company that just can cash flow and doesn't make it. [00:36:41] S2: For sure. If you've got the right portfolio and you can take the risk. [00:36:44] S1: It's not the way I will run my business, but I'm in a bull market or as Harry said, there's a whole bunch of upside acquirers with, frankly, free, you know, market caps that are fairly untethered themselves and have a massive need to move quickly. It's actually not a crazy way to make money. [00:37:01] S0: And you don't even need much. You've got a billion and 0.5 pref to reach. So, like, your downside is relatively capped on an incredible team that everyone acknowledges is industry leading.