The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
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.
00:39:47 · Harry Stebbings
[00:39:47] S0: We... We're gonna go a layer up and just a little excursion out of, like, deliberate AI, which is Miro, one of the hailed names from 2021 that raised at $17,500,000,000, interactive whiteboards for teams for people that don't know, sold to Bending Spoons, the Italian juggernaut that buys everything for $1,300,000,000. As I said, it's a long way down from the 17.5. We didn't... Well, Paul, my partner, who is very intelligent, did an analysis of it. Excel made money. Founders and employees made money. Latest Asian investors, not really. How do we see this asset, guys, for a darling of the SaaS ecosystem?
00:40:26 · Rory O'Driscoll
[00:40:26] S1: Inevitable and not bad. Right? Inevitable because I have a little report on our Salesforce that literally lists every unicorn, and I can do it a bunch of different ways, One of them being literally by post money. I just eyeball down and you see what's going on, and you just rank them, and it jumped out of you like a sore thumb. The last round was in '21 at 17,000,000,000. And when you eyeball, start to see the lagoon, you start to see the level, you start to see all the cognitions just above them and just below them, know, new rounds at $10.20000000000. You see we track headcount growth at the same time. Oh my god, headcount's exploding. And then you have the thing stuck at 17,000,000,000. And it was really the largest, utterly stale valuation from that period. So you look at it you go, Ah, almost inevitably you're high and dry because you're a productivity tool in a world that just doesn't work that way. It's obviously way ahead on valuation of where its actual market size or traction can be. So this is just an inevitability. It was inevitable that at some point it would get done. Andrew Reid from Sequoia had a really cute tweet. It's like a little graphic of, you know that picture of the death with the sickle knocking on every door, and it knocks on the Evernote door, and then it knocks on the air table door. And then in this case, it's knocking on the mirror door, and instead of a sickle, it has a bending spoon. Death comes for us all in Sassland. And I was exactly right. It was just an inevitable cleanup operation because it was just so far wrong in terms of pricing, and it was a good outcome for everyone. You kind of snidely said something about the late stage guys, I'm but gonna say something. The great thing about the late stage business is this. If your losers give you a one x, then you'll die rich. So Iconic, I think. Iconic had a ton of money in that deal. So that's a bad deal. A bad deal is when they get a one x. You know, if you're playing the venture game and because you're playing late and your preference gives you one x and everything, on on the worst case outcome, by definition, I mean, just using simple math, the overall distribution is net positive. So it's a good outcome for everybody. It needed to happen. It's now part of a liquid asset. I think, interesting, I didn't know this until today, so I'm winging it a little.
00:42:37 · Rory O'Driscoll, Jason Lemkin
I did see some portion of the consideration rolled. In other words, some people said, I'll take stock in bending spoons for that, which is interesting choice. [00:42:45] S2: Yeah. I don't know whether it was required or whether it was a way to juice the outcome, right, by rolling it over. You could see it being either way. Right? Bending spoons needed the... They don't have an unlimited balance sheet. There's only so many murals they can do. Right? But it could have also been to roll... It could have been a rollover into.