Venture Europe: Entrepreneurship | Technology | Venture Capital | Eu/Acc
00:31:16 · Calin Fabri, Chaz Englander
[00:31:16] S0: Interesting because I was just about to follow-up on how do you think about pricing now? And how do you price it? Like do you price per seat and then per usage? You combine those, like how do you look at it? And how do you think this is going to change? [00:31:30] S1: So yes, for now we're a seat based pricing model. We do have a small number of large customers, on a usage based pricing model. I think the way the market will evolve is I think it will be seat based that will sort of evolve into usage based and usage based eventually may even evolve into outcome based, if I was guess. The way that we think about costs as well, to be clear, I think costs, in the last six, eight weeks, you'd probably rarely hear series A, B, C founders talking about the cost of the underlying models. But the thing is, is just based now based on what they can do and the volume that they can do. The example I used earlier of like, you've got a list that you're monitoring and it's going off and doing modeling and building materials, that list could be 3,000, four companies. Right? So suddenly you're building systems that subjects having the correct infrastructure are capable of building hundreds, if not thousands of models and decks all at the same time. The spend in terms of the models is clearly going to go up. That naturally means that you'll move probably slightly more towards a usage based model. You could see this obviously with what Anthropic and OpenAI and the other vertical players like LegalAI, for example, are doing.
00:31:30 · Chaz Englander, Calin Fabri
[00:31:30] S1: So yes, for now we're a seat based pricing model. We do have a small number of large customers, on a usage based pricing model. I think the way the market will evolve is I think it will be seat based that will sort of evolve into usage based and usage based eventually may even evolve into outcome based, if I was guess. The way that we think about costs as well, to be clear, I think costs, in the last six, eight weeks, you'd probably rarely hear series A, B, C founders talking about the cost of the underlying models. But the thing is, is just based now based on what they can do and the volume that they can do. The example I used earlier of like, you've got a list that you're monitoring and it's going off and doing modeling and building materials, that list could be 3,000, four companies. Right? So suddenly you're building systems that subjects having the correct infrastructure are capable of building hundreds, if not thousands of models and decks all at the same time. The spend in terms of the models is clearly going to go up. That naturally means that you'll move probably slightly more towards a usage based model. You could see this obviously with what Anthropic and OpenAI and the other vertical players like LegalAI, for example, are doing. [00:32:56] S0: And can you give us a sense on where you stand in terms of ARR? [00:33:01] S1: I can't. What I can say is we raise... I always I always forget why I should should I say. We... Look. We are We [00:33:10] S0: can beep it up. Like, we can beep it up after.
00:33:10 · Calin Fabri, Chaz Englander
[00:33:10] S0: can beep it up. Like, we can beep it up after. [00:33:12] S1: Yeah. Look. We're gearing up. We're actually in the process of raising again, I think, to be honest, just given how close these raises are, you've seen this in legal AI, etcetera. We're in the process of raisingannouncing again. And companies in the space are raising anything from like a 40 times ARR to 60, 70 plus times ARR and we fall within that bracket. I think from our perspective, we've barely touched the surface by way of capital that we've raised. I think we're just very, very focused on I think this is a little bit like the second, third time founder comes in of like ARR is just vanity metrics. You've really got to dial in on the metrics that count, the underlying retention, the activity of the underlying users, what they're using the product for feature drops and these sorts of things. When you walk around the office here, I'm in London, Sarah, in our New York office, you're not seeing revenue numbers. You're really seeing almost consumer type metrics, which is interesting because obviously our background across the first two companies are both consumer and in some respects, this is Arne I's bread and butter. [00:34:35] S0: Absolutely. If we change gears and get personal a bit, why do you think a lot of entrepreneurs fail to reach the success that you and your brother had? Where do you think they fail?
00:34:47 · Chaz Englander
[00:34:47] S1: Perseverance, I think. Arnd and I kind of talk about this a lot. We did a podcast with YC, we mentioned this quite a bit. The way I think about it is if something makes sense, right, persevere. Persevere at all costs. It's not blind perseverance, but you should persevere as an entrepreneur. And I think more often than not, you see that's where it starts to crack. Now, this is where it's interesting. I mean, Arne and I personally, we've invested in maybe 50, 60, 70 companies over the last few years. And we really think about this deeply, what are the things that we think are good attributes for entrepreneurs and why? Now, perseverance is one. I think that genuine interest, so curiosity and resourcefulness and being genuine is so important, right? Because, you know, the way I explain this to people is that I have two children, have a three year old and a six year old, about to turn six. So three year old and a five year old. Congrats. And, you know, I'm seeing my children three or four hours every Saturday and Sunday afternoon, even when I'm with them. Now, I hope they trust that I, you know, won't be like this forever, but just given we are in crazy times, they'll forgive me in terms of the way that we work. But even when I'm with them, if you scroll through YouTube on my phone, you're AI and technology. It's just what we care about and what we are excited about, but it's genuine, Right? And I think, like, entrepreneurs, the ones that tend to win are the ones that are genuinely interested in the mission that they're going after. And I always, even in the interviews now, I probably shouldn't say this because then people will overly prep, but I always ask go to someone's Instagram or YouTube, what was I see? It's one of my interview questions because I'm trying to understand this point. It's like, do they want to come and work at an AI scale up because it's cool or are they interested? There's a big difference, one's sustainable and one's not. And then perseverance. I think you've got to enjoy the journey, but it is a journey. It's not A to B.
00:36:59 · Calin Fabri
[00:36:59] S0: Do you have some examples of perseverance from your own journey? And also, how do you test when you invest into someone to understand if they will persevere when things will get tough?
00:37:14 · Chaz Englander
[00:37:14] S1: So, I definitely think it's important to so, yeah, I mean, the example I put is, you know, Fat Alma's first rental of our first business. Bear in mind, it was a business, and the whole idea was we were gonna be able to ensure items that lent out. Our first rental of a drone resulted in a theft. Right? So Like like, you know, it's it's like it's like you couldn't you couldn't get much worse than that. And so... But but it but it still made sense to us, and we still knew logically speaking, it's not blinds for experience. We would be able to provide technology to to sort out that problem. Now, you know, how do you how do you look for that? I I really think it's like, where is this person curious? So people people shouldn't have passions and things that they care about outside of work, but but how much do they care about the topic that they're working on versus, you know, basically just thinking it's cool or they'd fallen into it, etcetera. And it and it... You really have to, like, pull that out of people. You know? And you can see it. Right? Like, you get onto a topic with someone and boom, they're a different person. You know, they're they're... You know, I I remember an interview that I I did last week. I was really trying to, you know, I... Is this person actually, know, interested in artificial intelligence? Frankly, if you're interested in artificial intelligence and you've not used Claude Code or Codex or Lovable, etcetera, and build your own things, you are fundamentally just not telling the truth, whether that's to me or to yourself. Right? Mhmm. And when this person started talking about what they built, you know, beyond vibe coding and they weren't an engineer, you know, by trade, boom. They were just like the excitement, and you could tell that they were just... It it was about the concept of building in the AI era that really excited them. And that for me was like, it's a 100% yes, right? Because you could see the passion, you know, it's obvious.