The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:03:00 · Harry Stebbings, Rory O'Driscoll
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00:04:22 · Rory O'Driscoll, Harry Stebbings, Jason Lemkin
[00:04:22] S1: You have now arrived at your destination. [00:04:25] S2: Boys, I just tweeted something that has got a rather large response from a founder community. I think Venture is broken today in the way that I'm meeting more and more companies that fit this profile. I just met a company today, and I have a company that's 20,000,000 in ARR, growing incredibly fast, six, 700% profitable, brilliant business with a great team, crickets. VCs do not want it. Is venture broken today? [00:04:53] S0: Look, I'm sure Rory has a of thoughts. I'll just add one one ahead of it, is we were talking about this company, which will be nameless. Right? I invested in a in a vaguely similar company, like, doing similar things for similar sized companies. They raised about a $3,000,000 seed round, and they're planning that's it, even with this type of growth, even with it all being agentic, even with it all being all the things we're supposed to be excited about, right? AI and voice and resolution agents, it does actually something that's pretty somewhat unique, but they're literally planning to never raise again because you get the fifteen percent eighteen a month venture update, but no one wants to meet. It's like, well, I'll put in a little more money, but it may have mean some ways in the old days where early investors may need to carry you if you're anything that's not hyper growth and the right boxes to check. Right? The three bike check. Your investors may have to carry you. It's like the old days.
00:04:53 · Jason Lemkin, Harry Stebbings
[00:04:53] S0: Look, I'm sure Rory has a of thoughts. I'll just add one one ahead of it, is we were talking about this company, which will be nameless. Right? I invested in a in a vaguely similar company, like, doing similar things for similar sized companies. They raised about a $3,000,000 seed round, and they're planning that's it, even with this type of growth, even with it all being agentic, even with it all being all the things we're supposed to be excited about, right? AI and voice and resolution agents, it does actually something that's pretty somewhat unique, but they're literally planning to never raise again because you get the fifteen percent eighteen a month venture update, but no one wants to meet. It's like, well, I'll put in a little more money, but it may have mean some ways in the old days where early investors may need to carry you if you're anything that's not hyper growth and the right boxes to check. Right? The three bike check. Your investors may have to carry you. It's like the old days. [00:05:41] S2: Jason, you're right. You said earlier that kind of specificity box has really narrowed in terms of what is interesting to investors. Yeah. And I'm seeing that more and more with this concentration of capital going to fewer and fewer names and everything else being wholly unfundable, which more so than I've seen ever in venture before, which is surprising for a sheep like market like Venture.
00:05:41 · Harry Stebbings, Rory O'Driscoll
[00:05:41] S2: Jason, you're right. You said earlier that kind of specificity box has really narrowed in terms of what is interesting to investors. Yeah. And I'm seeing that more and more with this concentration of capital going to fewer and fewer names and everything else being wholly unfundable, which more so than I've seen ever in venture before, which is surprising for a sheep like market like Venture. [00:06:02] S1: But what you're saying is if you think about... If you think of the role of venture financing innovation, what you're saying, there are lots of companies that look on the surface to have very good numbers that can't raise money. That's what you mean. Correct? [00:06:14] S2: Correct. [00:06:15] S1: And I think that's probably true. I mean, let give you the contrast, At the same time, I don't think it's just going to 10 or 20 companies in total. Because at the same time, are a whole bunch of projects that probably in another era would not get funded at all, that are getting venture money, data centers in space, quantum computing, you know, so we're very risk on for stuff that has ultra high upside. And I think the stuff that's struggling to get funded is, as you say, it's software for specific markets where there's some inarticulate fear that AI will make it all go away. Is that kind of a fair next level summary? [00:06:48] S2: Yeah, think so. I think you're absolutely right. I think it's this like power law on steroids requirement where it's like, unless you can paint me the trillion dollar market cap, I'm not interested.
00:06:57 · Jason Lemkin
[00:06:57] S0: To answer your question a little more, to be more tactical, Harry, I think you're right that you roll with a high powered crowd. I think if you want Sequoia and Benchmark and one of the better partners at Andreessen to fund you, the box is very specific, right? It's cursor better, right? Open routers, okay, but let's see what we can do better next time. I will say for companies like you described, growing at numbers that approach the iconic outlier metrics, right? Here's where I think actually the world is today. You gotta meet a 100, you gotta meet every VC, you gotta meet a 100. It is like the old days. And you will find someone that takes that bet. It will not be the seven benchmark partners and all the rest, but someone will take that bet at a reasonable, but still elevated valuation because it's the best deal they've seen this quarter. Someone will take it. You just got, it's the old days where you got to beat a 100 and there are growth investors whose names are not index and Dreeson and Bessemer. And they will take that bet because it's a good bet to grow his point. Will lead to a listen labs or better. In some cases, it's just you better meet everyone on planet earth. Now, if you just have top decile numbers, but top decile for a while was like an automatic of term sheet, right? For years, it was an automatic term sheet, right? You'd walk into Rory's office. Rory knew every deal since the dawn of time. He would know exactly if you're the top decile. If he believed in you and trusted you, you'd walk out with a term sheet from scale, right? The world just doesn't work that way today.
00:08:14 · Rory O'Driscoll, Harry Stebbings, Jason Lemkin
[00:08:14] S1: You might still walk out with a term sheet from sale. So what you're saying is there's a small number of extraordinary potential startups that the very best VCs are focused on almost to the detriment of anything else. That's your point, Harry. Correct? [00:08:29] S2: No. I'm saying the whole venture landscape has realized that a certain few categories are the most interesting and exciting, and everything else is uninteresting in a way that has not been before. [00:08:42] S0: Rory, back me up here. If you're raising a $5,000,000,000 plus fund, you you have to have billion dollar positions in everything. You even need a $5,000,000,000 position here or there, right? So what a $2,000,000,000 Listen Labs just doesn't is not good enough because the odds unless you have 51% ownership, which most founders are not cool with, it's pretty hard to build a billion dollar position. I mean, if I were working at one of those mega funds and we were playing our game, that would be my final question to the team. How are we going to get at least a billion dollar position out of this? And I'll take 1% of Anthropic. I think that still gets me to a billion dollar position, with dilution, right? The Eric Schmidt story. But you gotta have billion dollar positions in everything in in Big Boy Venture today, think. And and I don't mean boy with a gender attribution, big, big folk. You gotta have billion... It's billion dollar positions or nothing. There's no point in investing otherwise with large funds.