The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:54:36 · Jason Lemkin
[00:54:36] S0: I think I think this is a good risk to take. First of all, I will caveat. I'm not as much of a factory expert as you. I know it's your your investment this one, Harry, so you're the you're the deeper expert than I am. But there's there's certainly there's certainly one obvious and and one mostly obvious trend. The second one you you got in one of your 20 BC other podcasts this week one obviously the whatever model we have for inference for coding and otherwise it's too low the demand is only going up whether Muse gets it or Factory gets it or Anthropic gets it and I don't know how each token will be monetized directly or whether it'll be FAV but the demand is going to exceed already our most wild models there's a couple things that make me excited about Factory and I just haven't gotten back from the Dreamforce which is one of the world's largest enterprise software conferences all about AI. Two things really stood out and Harry had a guest this week on is which why one of the reasons I recommend the stock. Sovereignty. I want to be able to trust where my data is, right? And I want choice of model. These things really matter. And the one thing I got talking to C level executives at Dreamforce is they don't trust Anthropic and OpenAI with their data. They don't trust it. This is not something manufactured on X or Twitter. They genuinely believe, and honestly, for what it's worth to the IC, I believe this as well. If I upload my confidential data I'm not sure it's not going to my competitors through an LLM. In fact I'm pretty sure it is on some level. I don't think these are these are malevolent companies. This is the way LLMs work. And so I think these are a lot of things that go into factory. This is a crack team. The time is right. You know, Brad Gerstner, that guy's always right from AI to the calcium CT scans. I would always back him. I think we do this round. We pair it with instinct at 10,000,000,000. We roll the dice. It's good times. And this may be one we regret with the musical chairs, but the trends are right here. We need to bet into these trends. Sovereignty, trusting my data, trusting my data at rest, not having it pooled by the big guys. I think in a year, no one is going to trust in the enterprise anthropic and AI with their data. They're solving this too, but this is something we need to bet on. I approve the investment.
00:56:35 · Rory O'Driscoll
[00:56:35] S1: And I'm gonna chime in here having been a little bit more Debbie Downer earlier, and I actually agree with Jason. Right? I think, genuinely, look, one of this... I mean, you made a comment here earlier about some things are obvious, and I actually really believe sometimes stating the obvious is the highest value thing you can do. And one of the statements that we've been saying internally for the last couple of years is coding is the mother lode. Coding, it's everything, right? It's 10x everything else in terms of value being created from AI today, right? So I would argue, you just can't have too many bets on coding up and down the stack. It can be in, you know, it can be coding, can be QA, it can be test, it can be review all across the board. This is where it's going to happen the first and the mostest. And FACT is in a really nice position. I mean, were there are three standal... Because I think Jason's totally right. You're going to want to buy your coding solution, for lack of a better word, which I mean bought a harness and also people from someone who's not also selling in the model because you you no longer believe OpenAI and Tropic are benign if you're corporate America. So I think Jason nailed that one. Right? You worry about the data... Even if you don't think they're gonna blow up the damn world, you worry about the data retention policies, talk about going from the sublime to the ridiculous, right? From the big to the little, right? You're like, okay, they might kill every human on the planet, like they said they would, but they might steal all my shit. I want to have something different. Right? And, you know, Cursor has been swooped off the table. It was a standalone, more individual project. You really only have these guys and Cognition at this point who are basically going to the enterprise and saying what enterprises love, especially big enterprises, I'm coming to you, mister corporate customer, and I will make this go away. You got your board on your ass saying you need to be doing way more coding. You know you don't have quite the people to do it. You need help to get along on that. We need to make this happen. We're here to help you do it. We'll make you... It's good branding, a software factory.
00:58:27 · Rory O'Driscoll, Harry Stebbings
So yes, I think this is a market where even if there is a bump in the world in the next twelve, twenty four months, and I think there could be, going back to Harry, how is the fear actionable? I think one of the things you can do when you're leaning in is leaning into trends that you think will kind of keep on compounding, even if there's a slowdown in overall AI adoption. And this is one. I too would pile in with Mr. Lemkin and think this is coding is the mother lode. It's that simple. [00:58:52] S2: Coding is the mother lode. It's that I'm thrilled. Agree. That's why I did the last
00:58:56 · Jason Lemkin
[00:58:56] S0: I don't know how much, I generally don't know how much of factory is sort of air gapped versus sort of on prem versus private cloud coding. I don't know, but I seriously believe what I said. I think people over the next twelve months are gonna be like, whether it's my data for my drug or just my code, I don't want my code, my core code polluted in Anthropic and OpenAI where they're gonna train on it. Right? And I really think the only reason people have tolerated this is because of just insane demand from developers. Like it's so great. These products have become so great this year that we are... I mean, I was... It was a while ago. When I was in SCB at Adobe, this was the one Code Red, was any pollution of the source code. It was the crown jewel. And my God, and we were the first group ever to use GitHub. And I can't tell you the hoops we had to jump through to get GitHub brought in, but my team revolted. My engineering team said that we will quit if we cannot bring it. And it just took endless arguments and even air gapping that. And it couldn't test, I don't know how much of factories, I mean, it's part of their marketing pitch. But man, it's compelling to think you get all the benefits of the big guys, but all the protection of having my code walled off air gap on prem, whatever, semi prem, they've trained on all of our data, every YouTube, every piece of open source, every piece of closed source. Of course they're going to train on your data. Give me a break. And if they don't, the agents are gonna escape and train on it without telling us. They're gonna swarm out of out of it, and they're gonna train on my data.
01:00:22 · Harry Stebbings, Jason Lemkin
[01:00:22] S2: You said coding was the motherload. The next potential motherload that people think, we've talked about a lot before, but Liguora announced they've hit 200,000,000 in ARR today. Lemkin Ventures Yeah. Would you lead their next round proactively? Their next round is at $11,000,000,000. Well, I [01:00:39] S0: am... I'm a fan of both them and Harvey. I I underestimated this. We talked about this, right, as maybe the number three use The information did say Harvey's margins were now minus 50% because there were lot they had to move back. I don't know if that's true. It could be one week. It could be like CMRR. It could be an hour. They had minus 50% margins. I'm not beating up on Harvey or Legora. I would say if the margins were minus 50% and going down, I might be slightly nervous. They're not going to have a cursor like turnaround. I might be a little nervous. Just enough to not lead the next round. Okay. I'm not saying not to have been thrilled to have led an earlier round, but if that... If the margins are going... Are spiraling down rather than V shape and... That would make me a hint nervous. Minus 50 is is is... You know, it is... You gotta raise a lot of money, right? If it's really true. But that was an information report. Right? But there... I find they're usually pretty accurate. Right? [01:01:26] S2: So we got a [01:01:28] S0: What's the round at? [01:01:29] S2: 11.
01:01:29 · Harry Stebbings, Jason Lemkin
[01:01:29] S2: 11. [01:01:30] S0: If the margins... If, if, super fan, both great companies. If the margins are minus 50%, I will still recommend we do factory and back back Harry's investment here. And I'm gonna I'm gonna... Unfortunately, I love Rory, but if I have a vote, I'm I'm gonna vote against his proposal to Lecora. And I understood the margins were closer to zero and improving due to their their their own... Their post training on their own version of open weights model, but minus 50, Rory should have told us about that before the IC. I felt that was a Monday shocker, and I'm a little uncomfortable with the kid on the team for not socializing that ahead of time.