The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
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?
00:13:25 · Harry Stebbings, Rory O'Driscoll
[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? [00:13:33] S2: You can't change the past. I probably think if you were the CEO of OpenAI, you would look at this and go, Decisions that you made, you now regret because you've let these guys get away from you and do better. If there's any self reflection, there should be a ton of that going on. Nothing you can do about it. You just got to get your business together and converge and get out yourself. And in the meantime, obviously compete aggressively on price to try and screw up their Q3.
00:13:33 · Rory O'Driscoll, Jason Lemkin
[00:13:33] S2: You can't change the past. I probably think if you were the CEO of OpenAI, you would look at this and go, Decisions that you made, you now regret because you've let these guys get away from you and do better. If there's any self reflection, there should be a ton of that going on. Nothing you can do about it. You just got to get your business together and converge and get out yourself. And in the meantime, obviously compete aggressively on price to try and screw up their Q3. [00:13:59] S0: Never has such a successful startup named itself so poorly that I can think of as OpenAI. I mean, it would have killed almost any other startup what they went through, right? With the CEO drama, all the other nonprofit to profit drama, despite Startup doing better than them, they basically let Anthropic control part of the market for almost a which is like five years or ten years in AI time, right? There is a certain amount of parity with Astra and the open weights models today, best, but Anthropic own the fucking own the playbook for the chessboard for almost twelve months. There's no point in using any other coding solution and coding is the killer app as we already said 100 times. The math is true. They literally letting Dario walk out the door rather than build it in house and then firing the CEO and bringing them back over the night of long knives. I mean, my God, I mean, it's all going to be okay. But talk about own goals, I mean, every start up's full of them. This is just... These are some epic ones.