The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
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.
00:42:59 · Rory O'Driscoll
[00:42:59] S1: The cynic in me says, it's interesting if you do roll. It's like basically saying we couldn't do what it takes to turn this company into a cash flow positive machine. So I'm selling it at 2.7 times to guys who are trading at 14 times because they are tough enough to do what it takes. Because that's really what's happening. And to some extent, even though that sounds bullshit, it's true. Venture syndicates... I've been in boards where the company just flattens out and it needs to get ruthlessly efficient. It's just not our DNA, it's not how we roll, it's a syndicate of five different people. Oftentimes, these assets are better owned by a single owner who says, look, this is the way it's going to be, this is what we're going to do. I mean, I don't if you saw the CEO of Bending Spoons. He made a wonderfully controversial take He said something to the tune of, you know, we don't basically get all excited about the title founder. We don't want to know what you did. His basic comment is, we don't want you know what you did ten years ago when you founded this. We want to know what you're doing now. And what it's basically saying is, we can't do what it takes to fix this thing at three x revenues, so we'll sell it to you, take your stock at 12 times revenue, because you'll be hard and old enough to cut extraneous costs, raise prices, accept a fair amount of churn, and plow through. Just interesting, but also not great. It's kind of an interesting comment on how institutions can determine outcomes. It's not all rational economics, and it probably makes sense. Bending spoons will probably do a better job than a venture syndicate at making that thing cash flow positive. And if you're a customer of any of these companies, just be ready for the 40% price increase.