The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
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.
00:44:28 · Harry Stebbings, Rory O'Driscoll, Jason Lemkin
[00:44:28] S0: Yeah. The churn on their acquisitions is brutal. When you actually study the graphs on usage, the churn is absolutely brutal. They are not revitalizing these. They're increasing prices and cutting costs to the extreme. [00:44:39] S1: What they're really finding out is the marginal propensity to pay versus how much. The the VC... We probably almost certainly as an industry overinvested in sales and marketing and sold people who had to be sold into the product. What they're saying is, I don't want the customers who had to be sold into the product. I want customers who hate us so much for doubling our prices, but still need this product and won't go away. It's a different worldview, actually, because yeah, you're going to get initial churn when they put you with those price increases, but the perspective is the people who stay really need the product. This is like what happens when you have to pay full bill. [00:45:13] S2: Yeah. You triple the prices and you have 30 to 40% churn and the math's pretty straightforward. Right? I'll tell you my thought on on the Miro one, it was... I almost wanna move on. What's the game duck duck goose with kids? Where you... And don't you take out a chair each time you go around? [00:45:26] S1: Yeah. Yeah.
00:45:26 · Rory O'Driscoll, Jason Lemkin, Harry Stebbings
[00:45:26] S1: Yeah. Yeah. [00:45:27] S2: Yeah. I felt like there's only like one or two chairs left from the pre AI era. And Miro took... Bending spoons looks... They said in one of the interviews this week, they do a thousand... They look at a thousand targets seriously and do five to 10 a year. And even they are... Do not have an unlimited balance sheet. Everyone... PE is sitting out. Tom O'Bravo is mostly sitting out. I feel like there's one or two seats left for a thousand unicorns. And we can talk about why the... Why Icona got one x back and like like if if there were like a lot of options, I felt like it's different. There's like two chairs left at the end of DuckDuckGo. Miro grabbed one. Just like Airtable they only got one offer. When you sell for a 2 point something x you know for sure there was that there was no other offer because anyone can pay 2.4x or 2.5x it's not much more for Salesforce or Tomo Bravo or Francisco partners outbid so you have two and like I almost want to move on because I can tell you personally I've ended the game for me of DuckDuckGoose. I'm not running around the chairs anymore whatever it's fine. [00:46:24] S0: Who's next then?
00:46:24 · Harry Stebbings, Jason Lemkin
[00:46:24] S0: Who's next then? [00:46:25] S2: Look. There... Of course, there will be more deals, but I think we've entered the era of capitulation. And if there is a seat left in duck duck goose, grab it, grab it. But otherwise, the game's just ended. And these companies are gonna go into zero percenter mode. They're gonna go into zero to five percent growth mode and no one no one may buy them because if this is the best Miro and Airtable can do what if you're not Miro these are not bad companies Miro 600,000,000 in ARR still growing high single digits and cash flow positive like it's a pretty good asset. Right? So anyone worse than Miro or Airtable is not gonna get one of the last one or two chairs. Just no one wants to buy these things. And I I don't mean to be grouchy. Just mean I just give it... Like, kids, go go do whatever you want. Here's the keys to the house. I've moved to another city. Have parties. You know, crash the cars. Do whatever you want because Boys, moving swiftly on. [00:47:15] S0: What what would we like to do next? Jeff Dean's company hitting $50,000,000,000 after just raising it 10. We've got Citrini selling his company to Dylan Patel and Sammy Analysis for a 100. We've got OpenAI pausing pro sign ups. [00:47:32] S2: Is SPF getting out? [00:47:34] S0: I mean, he's got to accept his Midas list, doesn't he? [00:47:36] S2: He might have even been on the under 30 under 30 or something when he got it too, when he did the Anthropic deal. I think it was under 30.
00:47:36 · Jason Lemkin, Rory O'Driscoll, Harry Stebbings
[00:47:36] S2: He might have even been on the under 30 under 30 or something when he got it too, when he did the Anthropic deal. I think it was under 30. [00:47:42] S1: I'm gonna be the voice of humanity. I mean, yeah, he he is doing significant time, which really sucks, and that's a life waste. So I'm not gonna pile on on the guy yet. [00:47:51] S2: I think the Supreme Court's gonna take the case and overturn it narrowly. Because I watched his lawyer on YouTube. He was pretty good. He's done 50 cases in the Supreme Court. He's like a badass, like, Supreme Court lawyer. Basically, he's... And listen, I'm not the total argument. His point was this is an eighth amendment issue. You can't find somebody $12,000,000,000. This is unconstitutional. That can't repay it when at least according to the terms of the bankruptcy court everyone was repaid in whole with interest. We could argue whether they would have made much more money, right? But there are some constitutionality issues. I think he's gonna get his... I think the Supreme Court's gonna take it. They don't have to take any case. Think he's gonna get it. And, you know, whatever he's in jail for, thirty years and 11,000,000,000, I think it's... I think, you know, Sam may be freed eventually. This... Get... The Supreme Court hearing the case is a far cry from being freed, but I think he may [00:48:36] S0: have Jay, [00:48:36] S1: day did you [00:48:37] S0: think he should be freed?
00:48:37 · Harry Stebbings, Jason Lemkin, Rory O'Driscoll
[00:48:37] S0: think he should be freed? [00:48:38] S2: I mean, he seemed like the biggest scammer of all mankind when the... What was this all way back in 2023? It is weird he didn't enrich himself as far as we know materially, right? It is weird that... This is very arguably, very arguably. It's of course terrible that he moved assets between Alameda Research and... It's terrible, but the argument that it was allowed by terms of use is an interesting argument. It is an interesting argument. He did not self enrich. The reality is if you use a generous version of made whole, folks were made whole, should he go to jail for most of the rest of his life and have to pay 11,000,000,000 when he get out? It seems like a lot in the era of sentient AI that could kill us all. It does seem like a lot today. But at the time, you know, Silicon Valley Bank failed. I lost 10,000,000 over the weekend. I don't know about you guys. It seemed like it was just desserts at the time. Right? [00:49:26] S1: For what it's... One, hadn't prepped on this because it wasn't on the list. And I don't like a part... My wife, who is a lawyer, gets mad when I practice law without a license. But I will say it was so low down, Harry, I didn't think we'd get to it. You never do. [00:49:38] S0: Oh, that we get. Well, very honest.