The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:35:37 · Harry Stebbings, Jason Lemkin, Rory O'Driscoll
[00:35:37] S2: Z fellows gets unbelievably good people. [00:35:39] S0: At the end of day, idea, right? The problem with these things is if you don't put enough people into them, they don't scale. Right? That's why Z Fellows maybe is more interesting than the Thiel Fellowship, and why Horowitz and Dreesen is more... If it's the same as Marching, because you're just putting more resources and things that, you you used to be able to run a fund with a blog. Like that would give you all the deal flow in the world you needed for like five unicorns in a row, but you gotta scale this stuff up, you know? [00:36:01] S2: Now you're on a podcast with a professor. [00:36:03] S1: Yeah, used [00:36:04] S0: be able to just do with a podcast and one dude in a in a in a closet and do just fine. [00:36:08] S2: We haven't answered my question, though, which is I [00:36:10] S1: will go back to your point, Harry. Right? You are correct. Once you go beyond the vigil to even an individual an idea, you're right. You're seeing bigger checks. You you are seeing 20... Look. Think I the TypeScript was... I think it was even bigger. I could be wrong. I think I thought it's almost 40, but I could be wrong. But yes, people are writing bigger checks now up and down the stack.
00:36:10 · Rory O'Driscoll, Jason Lemkin
[00:36:10] S1: will go back to your point, Harry. Right? You are correct. Once you go beyond the vigil to even an individual an idea, you're right. You're seeing bigger checks. You you are seeing 20... Look. Think I the TypeScript was... I think it was even bigger. I could be wrong. I think I thought it's almost 40, but I could be wrong. But yes, people are writing bigger checks now up and down the stack. [00:36:27] S0: Or if you wanna do traditional seed checks, right, you have to tolerate far low... Lower ownership in many cases, not all cases. You can still hunt your own deals, right? And then when you do the math, you got to hunt $25,000,000,000 outcomes. If I'm going to do four into JEV or three into JEV, if JEV exits north of 25,000,000,000 after dilution, I can still do my 100X, right, that I need to do or my 50x, right? But the low ownership for seed works, but man, you need the big outcomes.
00:36:27 · Jason Lemkin, Rory O'Driscoll
[00:36:27] S0: Or if you wanna do traditional seed checks, right, you have to tolerate far low... Lower ownership in many cases, not all cases. You can still hunt your own deals, right? And then when you do the math, you got to hunt $25,000,000,000 outcomes. If I'm going to do four into JEV or three into JEV, if JEV exits north of 25,000,000,000 after dilution, I can still do my 100X, right, that I need to do or my 50x, right? But the low ownership for seed works, but man, you need the big outcomes. [00:36:54] S1: And then the other thing just to take into account that I always feel everyone forgets, right, is discuss on really dorky economics common, but nominal GDP, in other words, just inflation, but inflation plus growth from 2010 to the day is about two and a half x. So, you know, what that means is a $100,000,000 in 2010 is $250,000,000 today. You know, just in terms of your ability to command with money is an ability to command resources, because obviously, software salaries have at least kept up with nominal GDP growth. So what it means is if you were writing five... $3,000,000 checks in 2010, let's do $4,000,000 checks, you should be writing $10,000,000 checks in 2026. That's just math before anything else has changed. Then on top of that, you take into account the fact that in 2010, the world wasn't a shitter, and in 2026, everything in tech looks amazing. You get to 20,000,000 before you blink.
00:36:54 · Rory O'Driscoll, Harry Stebbings
[00:36:54] S1: And then the other thing just to take into account that I always feel everyone forgets, right, is discuss on really dorky economics common, but nominal GDP, in other words, just inflation, but inflation plus growth from 2010 to the day is about two and a half x. So, you know, what that means is a $100,000,000 in 2010 is $250,000,000 today. You know, just in terms of your ability to command with money is an ability to command resources, because obviously, software salaries have at least kept up with nominal GDP growth. So what it means is if you were writing five... $3,000,000 checks in 2010, let's do $4,000,000 checks, you should be writing $10,000,000 checks in 2026. That's just math before anything else has changed. Then on top of that, you take into account the fact that in 2010, the world wasn't a shitter, and in 2026, everything in tech looks amazing. You get to 20,000,000 before you blink. [00:37:49] S2: Would you actually argue then that now is a better time because your check size requirements have gone up two and a half to three x, but the outcome sizes on the back end have gone up significantly more than two and a half to three x when we look at the cursor
00:37:49 · Harry Stebbings, Rory O'Driscoll
[00:37:49] S2: Would you actually argue then that now is a better time because your check size requirements have gone up two and a half to three x, but the outcome sizes on the back end have gone up significantly more than two and a half to three x when we look at the cursor [00:38:02] S1: No. I wouldn't make that argument at all because what you're confusing... For the... It it... The The outcomes today happened from the checks that were smaller. In other words, because what you're saying is, hey, the outcomes today on checks written five years ago are amazing. Therefore, the checks today, which are much bigger, will be amazing too. Implicitly in that you're assuming, you know, that the $25,000,000,000 outcome today becomes the $50,000,000,000 outcome three years from now. And if that's the case, then you're correct. [00:38:34] S2: I'm the same rate of inflation applies to the exit scenarios.
00:38:34 · Harry Stebbings, Rory O'Driscoll, Jason Lemkin
[00:38:34] S2: I'm the same rate of inflation applies to the exit scenarios. [00:38:38] S1: Yeah, but I take it, but the exits didn't just go up by nominal GDP, they had by even more than that. Right? In other words, you've seen it. That's why it's always hard to disaggregate things, you have normal GDP go up, but then the stock market has massively outpaced that. And venture exits have even more massively outpaced that again. So there is a long term secular trend and the size of exits going up. But there's probably an overlay of evaluation lift right now that might persist. And here I gotta give a shout out to Venky from Menlo who did a really nice piece that, you know, went around all the venture community yesterday just about, you know, playing the game at the top of the cycle. And how do you think about it when, you know, when the music stops, be sure you have a chair. It's worth reading. [00:39:16] S2: I get you. But with the greatest respect, Menlo have paid the highest price of everyone on most rounds. [00:39:22] S0: Yeah. That's why they're playing the music.