The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
01:04:21 · Jason Lemkin
[01:04:21] S0: I mean, to be honest, as you know, the fund doesn't believe there's anything really defensible in these data center models other than the backlog and access to infrastructure. But we believe Crusoe is at the top of the second tier there, right? They have some interesting things, right? They're able to build their own modular data centers, They own the chain from power to tokens. There's a lot of appealing things in this. I think our approach at the fund needs to be a portfolio approach. We should invest in all the data centers that rise above a certain level of projected DCF projected growth projected margins and most importantly circular guaranteed circular financing. And this is all this is all as much as I love the boys at Crusoe. This is all a spreadsheet investment. I've done the math and I believe it's just below the fold. It's just a hint too expensive to hit our margin despite the growth. But I think we should do all of these deals that have the requisite level of circular financing and the ability to access infrastructure. So I give them that. I'm just a little bit worried about the valuation here. So reluctantly, reluctantly, I'm gonna have to pass on on Crusoe. 10,000,000,000, though, would have been great, boys. You guys, bonus this year will not be what you'd hoped. They will be epic bonuses this year. I make them all the decisions as the managing general partner, but I think you'll each take a couple million dollar hit by missing the last round. Telegraphing that in September.
01:05:37 · Rory O'Driscoll
[01:05:37] S1: Pushing back and taking that and going back to my earlier comment, how is something... When I said about, you know, worrying about a slowdown, how is it actionable? This is an example of where it is actionable. Right? Because something like a coding agent, something like a AI app, like Harvey Lagore or whatever, there's a long trajectory. They're not levered plays. You probably can survive a one year bump. Conversely, the data center trade is very levered, so very exposed not just to AI usage, but to growth in AI usage. You're really leaning in on the upside, which means there are amazing investments to the up, and it probably would be tough investments to the down. You wouldn't want to be out of that sector. But again, going back to how do you make these concerns actionable? Right now, I'd be saying to myself, if I had if I had a portfolio across the whole kind of AI spectrum, I wouldn't want it all to be in that AI CapEx trade where any kind of slowdown when you've got, like, four or five to one leverage can be pretty brutal. So I would be a little bit afraid. I'm not gonna... The specifics on cruise. Jason, you're It is a spreadsheet exercise, and I haven't run spreadsheet. So I don't know. Right? But I would be thinking in macro, how much of that bet would I want? Right? I'd want some because it's been an amazingly good bet. I mean, look at Corweave. But you also look at the market cap. I want to think Corweave's at 60 and Nevis is at 40. I could be wrong. It could be the other way around. And so Crusoe at 30. I mean, I think it's smaller than Corweave growing much more quickly. So again, it's... And they all have, you know, pretty substantial negative free cash flow. So a lot of your success is betting on future CapEx. And maybe the other statement, Harry, to further prove that you're wrong and that you can in fact take into account some of those risks. My appetite for a deal like this would go up directly proportional to how much, as Jason said, a long term commitments you have from a Microsoft versus a second tier, and then b, how much visibility you have on your debt runway for the next three years. I would prefer a slightly lower price, slightly more dilution and a longer runway, such that if there's a data center bump in the next twelve months, you're protected.
01:07:36 · Rory O'Driscoll, Harry Stebbings
I got to finish by saying a really fun day in The Wall Street Journal yesterday. I don't know if you saw it, but I read the journal in the morning, I check-in in the evening. It's... It was so funny yesterday because the headline in the morning was deals pull as Wall Street worries about data center trade. It was, you know, SPN and then there was two others. So it a nuclear company, one other. So that was the headline, top of the page, first thing in the morning. We then had the best single day in the Nasdaq since the dawn of time. It was an amazing day. And the headline at the end of the day was Nasdaq Explodes as AI CapEx Fails Recede. So literally... And what you saw in that, literally, in the space of eight hours and one trading day, people went from, oh my god, CapEx is scary, to The Wall Street Journal is like, it's all gonna be great. And it was just... It was fun to watch that kind of oscillating, you know, terror greed moment in real time, literally in the same eight hour period. [01:08:28] S2: Boys, what have I missed? [01:08:30] S1: Clearly, the last Crusoe round. But I missed it too, dude. [01:08:34] S2: Rory, is there any other that you think I've missed? It it is a slight recycle, but I do just think it's worth saying. I'm sure you guys saw at the Twitter sphere. Keith Raboy, Joe Lonsdale, going for our Wallachs unbelievably again.
01:08:34 · Harry Stebbings, Jason Lemkin
[01:08:34] S2: Rory, is there any other that you think I've missed? It it is a slight recycle, but I do just think it's worth saying. I'm sure you guys saw at the Twitter sphere. Keith Raboy, Joe Lonsdale, going for our Wallachs unbelievably again. [01:08:50] S0: I don't get this one. I I really don't get... Let's put aside the issue... Let's put aside the issues for a minute. Okay? Let's... My gut is that there's a little bit of racism here. There's a little bit of anti culturalism, but let's put all that aside. Let's just a ramp is obviously a big investment, right, for for them. So I get supporting the home team. Right? And I get pushing the envelope there and it's 2026. This just seems... Maybe if you're Keith, who's very experienced and very smart, maybe it's worth it because he doesn't have any bridges to burn or worry about, but it it just seems a lot. I guess if it works, if this destroys Airwallex, right? If the X and the house, whatever it is, the house review of it, if it destroys your competitor, Machiavelli and I get it, right? But I don't know. Maybe it's not too far. It just feels very aggressive, right? You know, it's like, what do we call them back in the day? Dipling and real deal back real, dipling and real, but on steroids, on steroids is dipling and real on steroids. And maybe it makes sense. It just, it just struck me. Maybe I'm too... Maybe I I just care too much, but it struck me as just aggressive. Just aggressive. Right?
01:09:50 · Harry Stebbings, Jason Lemkin
[01:09:50] S2: I'm always very careful because I I am an investor and I always be very clear. I'm also a friend of Keith's, and I like Keith a lot, and I respect him a lot. But the allegations have consistently changed from you are a CCP agent who is working for China to more than 20% of your cap table is in China and Chinese, which is not true, by the way. They have got more and more diminished over time as the arguments have weakened. When you look at the companies that have employees in China, it's basically every big company today has some form of their employee base in China from Microsoft to Zoom, you name it. Candidly, it's ridiculous. [01:10:25] S0: Well, know, I mean, I mean, Finn got rid of all of their open open weights models before they're acquired by Salesforce. I don't know that it's ridiculous. I don't agree with it. Like, I would not be making those tweets. This is a big deal. Finn to close its three point whatever bill now had to had to rip out all of open weights model out of its company before the deal would close. All gone. People care about this China stuff. We could argue both sides of it. And I don't like the I don't like the tweets, but I wouldn't say there's nothing nothing too concerned [01:10:50] S2: So so then we should put the same scrutiny on Zoom and Microsoft. [01:10:54] S0: I started this by saying I don't like it, I'm not on the side of it, but I am saying the Fin thing is interesting. Matters to businesses, not just Twitter.
01:10:54 · Jason Lemkin, Harry Stebbings, Rory O'Driscoll
[01:10:54] S0: I started this by saying I don't like it, I'm not on the side of it, but I am saying the Fin thing is interesting. Matters to businesses, not just Twitter. [01:11:05] S2: Respectfully don't think there's a correlation, Because if you think then that it is interesting, we should talk about ownership. [01:11:12] S1: Hang on. What what what are you saying, [01:11:13] S2: Howard? They don't have the Chinese ownership. That's my point. I've... I know. I've got the cap table. [01:11:18] S0: I'm not disagreeing with you. I'm saying why there is sensitivity around Chinese ownership. If it's not true, it's not true. I'm not arguing the point. I'm making the point that in a more traditional world outside of X, a very large transaction had to rid itself of all Chinese IP to close. I just had another portfolio company last week. We had the same discussion. They had an M and A offer and they were being told they had to rid their company of all Chinese IP as well, rid all of it before the deal could close. And Airwallex isn't trying to sell itself to Salesforce and it I'll take take it on your faith. I trust you implicitly that it's not 20%. I'm just telling you that it is a real world issue, this Chinese ownership, even if I don't care about it or agree with it. It is impeding transactions. It is impeding commerce, and it is a concern.