The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:39:22 · Jason Lemkin, Rory O'Driscoll, Harry Stebbings
[00:39:22] S0: Yeah. That's why they're playing the music. [00:39:24] S1: That's why... But I think... No. I think that what he would say is... I think he would say that. He would say, we very wisely... Look. I I think it was a really good analysis. I didn't mean to take us off, but he's basically... There's two players now. There's players who are playing with the house money, he put themselves in that category. They've done so well on Tropic, and they're probably feeling a little happy, and they're probably gonna be aggressive. And then he said there's some players who didn't do that... Didn't do those early rounds and are now playing to catch up. And the point he was making, the macro point he was making is between the giddily happy people and the and the terrifyingly desperate people, there's a lot of people writing checks with fear in their heart of miss... Of FOMO. And it gets back to your comment. Some part... That's why it's always... Some part of the increase in size is justified by math. But let's be honest, I think some part of it is justified by FOMO and the fear of missing the next cursor. And that's fine, but that's the kind of thing that can change on a dime. And that was the insight. [00:40:18] S2: Does that change how you invest when you reflect on that? What should I take from that, Rory? What should LPs listening, GPs listening take from this?
00:40:18 · Harry Stebbings, Rory O'Driscoll, Jason Lemkin
[00:40:18] S2: Does that change how you invest when you reflect on that? What should I take from that, Rory? What should LPs listening, GPs listening take from this? [00:40:26] S1: It's a good question. And again, I'm always in the middle. I think you have to say at times leaning in can pay out, but you don't want to find yourself so lent in on so many deals that are so high priced at such a, you know, on sort that if a downturn comes, get, you know, you just can't survive it. As often is the case, investing is not a rules based business, do A and only A, it's typically do some A, but some B and the mix is everything. I think for us, it's a consistent pace, broadly the same stuff and recognize that, you know, it's super hard to time that. But be cognizant of the risk you're taking is the bare minimum you have to do. [00:41:06] S2: Is that... I'm I'm not being rude to say. I'm I'm going for [00:41:09] S1: you here, but fucking you go for me. [00:41:11] S2: Be cognizant of the risks you're taking. Seriously? Like, I thought that piece was a blowhard piece, if I'm honest. Be careful of the music stopping. Be cognizant. Again, you guys have paid [00:41:22] S0: up money. That's what the next one's for. Why do need be careful the music stopping? You raise a fund every eighteen months. We all can get a mulligan. Yeah. If I don't make any carry, don't make any carry. I make it on the next one. It's alright. Doesn't matter. [00:41:34] S1: But the... But I I I just got a point. I don't think that that's
00:41:34 · Rory O'Driscoll, Harry Stebbings, Jason Lemkin
[00:41:34] S1: But the... But I I I just got a point. I don't think that that's [00:41:39] S2: I'm not saying that is it, but what I'm saying is there's just... There's not that much to take away from that. Yeah. Be cognizant of the music stopping. Thanks. [00:41:46] S0: I'm with you. I'm with you on Harry. It it it it... It's a little condescending in its own way. Right? Oh, thank you. I wasn't aware that the AI Gold Rush might end someday. Good point. I so lost in JEV all weekend. I missed the point. You're right. I missed the point. [00:42:04] S2: From the guys who made out like Bandits, which I'm thrilled of. They're they're awesome people. [00:42:08] S1: They may... Okay. Watch this. The the big... They made out by Bandits by being aggressive at a time when people were still uncertain. Right? And therefore, price of those deals, while high in absolute terms, reflected a fair amount of uncertainty relative to traction, right? The same deal today would probably be three or four X higher. And it's simply a point, if all you say to yourself is that deal that worked four years ago had that risk return profile, and underwriting that same deal today probably means I'm gonna get four times less return because of where pricing is, you should at least pause and think rather than blindly saying x worked, Therefore, all the other deals that just look just like x will work also. [00:42:49] S2: I never thought it fucking obvious.
00:42:49 · Harry Stebbings, Rory O'Driscoll, Jason Lemkin
[00:42:49] S2: I never thought it fucking obvious. [00:42:51] S1: Harry, in general, one of my favorite quotes... And I'm gonna take you... You're coming for me. I'll come for you. Right? Barney Baruch, I think I quoted this before. Right? And I'm sorry if I did, but he was a Wall Street financier in the twenties and thirties. He just said, if every day you look in the mirror and you say to yourself, two and two makes four, you probably could avoid a lot of mistakes. Right? Stating the obvious. Typically the things that bite you in the ass are things that are actual obvious all along and you just chose to ignore them. So, it is obvious, but, you know, you have to take into account. [00:43:21] S0: What do you do about that? Right? Like, I'll give you an example. In 2021, I made one investment. I did the seed rounded owner, just closed at 2,300,000,000. It's a pretty large position for me. Okay. Now we've had ups and downs, great founder team, one deal in all of 2021, only deal I did. You could do the same thing right now. You could say it for the next four years, I'm going to do like one or two deals. Like, I have to have a little dislocation in the force. It's gotta be this. It's gotta be that. And that... That's how you take that the the chairs are gonna end. Otherwise, you you just gotta... It's... You gotta deploy the fund. It's other people's money. You gotta put it to work.
00:43:21 · Jason Lemkin, Harry Stebbings
[00:43:21] S0: What do you do about that? Right? Like, I'll give you an example. In 2021, I made one investment. I did the seed rounded owner, just closed at 2,300,000,000. It's a pretty large position for me. Okay. Now we've had ups and downs, great founder team, one deal in all of 2021, only deal I did. You could do the same thing right now. You could say it for the next four years, I'm going to do like one or two deals. Like, I have to have a little dislocation in the force. It's gotta be this. It's gotta be that. And that... That's how you take that the the chairs are gonna end. Otherwise, you you just gotta... It's... You gotta deploy the fund. It's other people's money. You gotta put it to work. [00:43:53] S2: Or there could be a really rational assumption that, hey. The music's gonna stop pretty soon, and we're gonna go through StackRank where we can get liquidity from and really be proactive in selling positions now. Cool.
00:43:53 · Harry Stebbings, Jason Lemkin, Rory O'Driscoll
[00:43:53] S2: Or there could be a really rational assumption that, hey. The music's gonna stop pretty soon, and we're gonna go through StackRank where we can get liquidity from and really be proactive in selling positions now. Cool. [00:44:04] S0: Well, that's one thing. Right? And that's that's an interesting question. But let's say you wanted to be let's say you wanted to be conservative. What do you do? Invest in the company at $50,000,000 growing 60% a year and hope it reaccelerates and is worth three times revenue and sells to Bending Spoons? I mean, what's the plan B? Like, Bending Spoons looks at 1,000 deals a year and still only does two or four. Where am I gonna sell these more conservative companies that are compound for... At at at sub AI rates for forty years? I just don't know where the... Who's gonna buy them. If there is a market for these assets, so be it. I love the quiet compounders. There's just no market for them anymore. [00:44:38] S1: I'm not sure I agree that there always won't be a market for quiet compounders above a certain scale, to be clear. But I think profit [00:44:45] S0: Could come [00:44:45] S1: a couple 100... What? [00:44:47] S0: Could come back, but right now it feels pretty thin. [00:44:49] S1: Yeah. I actually like Gokul's tweet that he was like, yeah, I'll have to do three, you know, double trouble, double double deals all day long right now, if you're capital efficient. [00:44:58] S0: Yeah. If you're burning nothing and the price is right and I can get my 20% ownership, you'll do it.