The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
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.
00:37:01 · Harry Stebbings, Rory O'Driscoll
[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. [00:37:11] S1: I mean, this is the classic Silicon Valley thing is that examine that risk return profile at 50 pre, which is as far ago back as April, I think. That's a wonderful profile. At 500 pre, which I think was the May or June round, that's interesting. Yeah. That's a good bet because they're little further along. The interesting thing is in the space of two or three more months you've had around... Is it... Was was the other one the 2,000,000,000, Harry, from memory? [00:37:36] S0: Two point two point five billion. [00:37:37] S1: 2,500,000,000. Now you're getting into the... It's a four x if you get out of the billion, and now you're raising a 10. Now you really need that 50 or... You know, need a reminder, the largest M and A outcome ever was Cursor, doing 4,000,000,000 got 60,000,000,000. I don't know if you get a $40,000,000,000 outcome without a shit ton of revenue. My point is the risk return profile was wildly attractive in April and increasingly unattractive fairly quickly by the time you come to September. So that is the problem with those kinds of bets. [00:38:10] S0: You know, one interesting thing that is just like the consumer product market fit for this product is so wild. I did an Instagram reel on it. I had over a thousand DMs asking for invite codes. I've never had a thousand DMs on the back of a reel. That's pretty wild.
00:38:10 · Harry Stebbings, Rory O'Driscoll, Jason Lemkin
[00:38:10] S0: You know, one interesting thing that is just like the consumer product market fit for this product is so wild. I did an Instagram reel on it. I had over a thousand DMs asking for invite codes. I've never had a thousand DMs on the back of a reel. That's pretty wild. [00:38:24] S1: It's awesome. No. [00:38:26] S2: Can I just add one interesting thing? Yeah. Just on your on your thing. You know, Alex Kerlin just left to go to Menlo Ventures, right, from [00:38:33] S1: there? Yeah.
00:38:33 · Rory O'Driscoll, Jason Lemkin
[00:38:33] S1: there? Yeah. [00:38:34] S2: He was on the board of owner with me. Known him since the very beginning. It's OG Saster when he started the industry. And he wrote a little presentation about how Menlo thought about this. And not that this is so profound, but he said kind of they're targeting 25,000,000,000 plus tech exits. They're targeting 100 of them. That's how Menlo's modeling the world. And that's what he went to join, to find some of these 100, not all 100. They don't have be in all 100 of the $25,000,000,000 plus exits. Right? That's the model we can say, wow, cursor was at 60, but cognition just raised at 48. So if this is your world model that there are a total of eighty one, twenty five billion tech companies now, but that's up from twenty three, ten years ago, And that trend is going to continue in the age of AI. You know, wrote that the new Decacorn is $25,000,000,000 These instinct grounds make sense. Like if the good exits are all north of $25,000,000,000 then at least I can make 3x on instinct, right? It was just interesting to see that's their model, Is that we're targeting $25,000,000,000 plus exits in any investment that we do and we see there to be another 100 of these. Now how that old math works out with GDP and the market caps of trillion dollar companies, I need to defer to Doctor. Rory O'Driscoll next to me because I can't make it work in my head without an LLM. But I assume there was some thought behind the mental math here of a $125,000,000,000 exits.