The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:06:14 · Rory O'Driscoll, Jason Lemkin, Harry Stebbings
[00:06:14] S2: No, I won't ask you, Jason. I mean, I think that I saw a tweet that basically said the same thing as every founder and every investor is looking, why am I bothering with anything else? These are such stunning numbers in terms of size, scale, and speed that you're right. It's going to dominate the results for, you know, for a long time to come, and everything else just seems a lot more work for a lot less return compared to it. And all credit to the founding team, all credit to the investors who got in early. It's just a great way to make money. Things going up into the right faster than anything else in human history for five years to add up to a trillion dollars. That's as good as getting venture. [00:06:48] S0: It Yeah, was funny watching Byron Deeter from Bessemer on the TV shows saying, This is the greatest investment in the history of Bessemer. I think Bessemer was founded in the nineteenth century or something like that. Don't know what the funny was. Their greatest investment and their largest checks, Right? So to see that all happen now after a hundred years, that's the end of... That's that's the whole story. Right? I mean, greatest greatest investment, biggest check, fastest time to to liquidity. Why are we doing anything else? [00:07:14] S1: Rory, you said about questions there. There are always cynics in the audience. There are always people throwing peanuts. If you were to to present the alternate view of, oh, here was a striking number or two, is there any that?
00:07:26 · Rory O'Driscoll
[00:07:26] S2: The interesting one, 80% of the revenue comes from models that are less than six months old. And then separately, you'll note they didn't give you a gross margin, an actual gross margin calculation. They just didn't lay it out that way because you can do that in accounting. You can just put all the compute costs into one place. And then it kind of gave a footnote breakout that kind of 70%, 80% of the compute costs are for training, not for inference. In other words, once you've built, the models are wildly expensive to build. Once you build them, they're fairly wildly profitable to serve, and you want to get to serve them for six months, and then you got to invent another one. It's so not like software where you build something and maybe you can sell it for ten, fifteen years. In this case, you invent something, you get most of the revenue from it in six, twelve months, and then you have to continue to invent masses of money to build the next one. And then your question is, so what do you make of that? Because the funny thing is that that's the facts. And you could look at it one way and say, Oh my God, that's totally scary if you miss even once you're screwed. And on the other hand, you can say to yourself, That might actually be great for Anthropic, because they're best in the position to build new stuff, and they want to build new stuff. And they said that very clearly, We want to build new stuff. And if all the time... Very few people are going to be able to compete with this. Very few people... Like, if the next turn of the crank on the model... I mean, if they spend $8,000,000,000 on compute year to date, June 26, and they're going to spend $16,000,000,000 next year. There's very few people who can write a 10,000,000,012 billion dollars compute check. They can continue to invent these new models, get masses of revenue from them, and then, yeah, maybe at the back end, other folks have it. So even though that statistic was kind of weird and scary, oh my God, the shelf life of your amazing product is six months. It's actually, I would argue, an advantage if you're the kind of leader and you're willing to just be aggressive on it, right? But it does point to that. So therefore, what looked like a negative isn't, it just points to the incredibly dynamic and scary nature of the game.
00:09:24 · Rory O'Driscoll, Jason Lemkin
But this is a game where you have to spend like billions and billions and billions of dollars just to play. [00:09:29] S0: That was Elon's point that most of these neolabs are just gonna die after this. They're just can't... It's not possible to raise the capital to survive, right? I thought there was one bad metric that wasn't in the S1. I thought the worst metric wasn't in the S1. [00:09:41] S2: Go for it. [00:09:41] S0: The worst metric was that Broadcom had to bail out this debt issue so that Anthropic could buy its chips. That the market was saying, it doesn't get much, it doesn't get any better than Anthropic. We just read the S1, right? It doesn't get any better. But they weren't able to get this debt for this semi circular deal with Broadcom, and Broadcom had to come in and guarantee most of it, and they had to pay even higher interest rates than expected. It's not that it's terrible, but it certainly suggests that going forward fundraising even for Anthropic and OpenAI and even if it's somewhat indirect is it's getting harder. That combined with the fact that it's getting harder and harder for the banks to lay off and sell the neolab debt, I think that's the real only one to be nervous about, that the debt isn'tis exhaustible here.
00:10:25 · Rory O'Driscoll, Jason Lemkin
[00:10:25] S2: Pushing back on that, because I do hear you, because I would actuallyI think the fact ofI I think the amount of debt the banks are digesting has hit the limit. But I actually think the interesting thing about this week and about the last few weeks has been we're equitizing the issue. In other words, it was all debt. But if you look at it, Anthropic is about to issue plus or minus a billion, a $100,000,000,000 of stock. Meta issued $70,000,000,000 of stock. Earlier this year, Google issued about $80,000,000,000 of stock. Obviously, SpaceX did their IPO, right? What you're seeing is that there are a class of companies that have cheap cost of capital and, B, are willing to take equity dilution to make it all happen. So my from that is at the macro level, it's just going to keep on happening. This trend is not stopping. And the people who want to have it happen are willing to take equity dilution to keep going. So the spend will be there. You're right, Jason. I mean, Elon's doing his thing of cutting off the oxygen from the other people. It's like, oh, you people who just have debt are screwed. You're going to die. I, on the other hand, have one of the world's most inflated market caps, so I can issue equity and get access to all the chips I want. So it was very much a kicking someone else while they're down move, which is very vintage, Elon, and you got to respect. [00:11:40] S0: But they'll have like 200,000,000 of total cash on the balance sheet or something like that after Anthropic will. So that's a lot of cash.
00:11:40 · Jason Lemkin, Rory O'Driscoll, Harry Stebbings
[00:11:40] S0: But they'll have like 200,000,000 of total cash on the balance sheet or something like that after Anthropic will. So that's a lot of cash. [00:11:48] S2: I mean, let's be precise. I think it is out of the first or second largest pile of cash in all corporate America, [00:11:52] S0: which is first. Read it was the second, but it doesn't matter which one it is. [00:11:55] S2: Going public. I mean, this is a company going public where it already has more money than every other company in America, bar one, at a 110,000,000,000 on the balance sheet today. They've done a masterful job of raising a 130 and only spending 10 or 11. Masterful. Do [00:12:09] S1: we think it's gonna have an amazing reception? [00:12:11] S2: I do. I mean, I'm not sure. I mean, hell, I don't know. You know? I mean [00:12:15] S1: Oh, we're in the predictions game, Rory. Go for it. [00:12:17] S2: I I know. Think I I think it should. I mean, I think it's an amazing company. You just can't argue with [00:12:23] S0: I mean, doesn't it, like, a SpaceX almost instantly have to go into the S and P 500? [00:12:28] S2: Not the S and P 500. If it's... If you're listing on Nasdaq, which I think it is, I didn't check, you go into the QQQ index, but the S and P index takes... There's a profitability metric or something like that. So it takes some time. But, yes, they will be in some index funds pretty immediately. But I don't think this is going to need that lift in the same way arguably SpaceX did. I think this is going to be just a stock people want to own.
00:12:28 · Rory O'Driscoll, Jason Lemkin, Harry Stebbings
[00:12:28] S2: Not the S and P 500. If it's... If you're listing on Nasdaq, which I think it is, I didn't check, you go into the QQQ index, but the S and P index takes... There's a profitability metric or something like that. So it takes some time. But, yes, they will be in some index funds pretty immediately. But I don't think this is going to need that lift in the same way arguably SpaceX did. I think this is going to be just a stock people want to own. [00:12:48] S0: But even just getting indexed into everything in the net, it's just a retail boost, right? They're not going to miss a quarter, whether it's 900 I mean, within a range, it's not that I don't think they could disappoint, right? But within the next two quarters, and I think we have to be careful to use NRR as a metric here, but still true. Right? With 900% NRR, even if in reality it's more like 300 to 400% because it includes like pilots and trials. I just think that plus the brand plus being in the Nasdaq 100, it'll probably have a good retail run plus SpaceX. I I... Yeah. Why would you bet against it? [00:13:25] S2: If for Sam [00:13:25] S1: Altman reading this, thinking about q one going out himself, do you think he takes away anything from it, changes anything as a result of it?