The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:28:21 · Rory O'Driscoll
[00:28:21] S1: One of things we said last week, I stand by it, the best markets for standalone AI apps and I put coding as effectively an app, the ones with the highest growth rates have also been closest to the sun, they've been closest to the foundation of mind. In fact, I just did a tweet on that today. But you know, it's the Icarus moment. Icarus had no choice. He wanted to get warm. He got to fly close to the sun. I think these big use cases are interesting. You know, it's like cogeneration, code review, legal. They're all very close to the foundation models. And every six months, you have the terror moment of Oh my god, they're going to do it, right? And that's the downside of being in that real estate. But the upside in being in that real estate is they are marquee, they are superb use cases for the technology. And as a result of that, you know, CodeRabbit, all these companies are growing faster than we've ever seen. If you want to avoid that risk carry, then you go back to your like dull little 3x year on year software companies that you were bullshitting on about earlier, right? That no one wants to invest in, right? You can't have it both ways. You know, you can't sit there and go, oh, I want infinitely fast growth rate, utterly undifferentiated from foundation models, even though the only reason we're getting the fucking growth rate is because the foundation models have unlocked new capabilities. It just doesn't make sense. That's not a thing. I mean, I'd like to be, you know, a lot of things in my life, but it ain't gonna happen.
00:29:37 · Jason Lemkin
[00:29:37] S0: I don't know if this is true from a venture outcome or revenue, but I actually think code review is the single most important category today in software. By far the most important category. It does not mean it will make the largest fortunes. It does not mean there'll be a 600,000,000,000 code review cursor. But what I mean is you cannot vibe code your own SAP and Salesforce, but the rate at which we're building code is unprecedented. And the code now is pretty darn good, but it's never production intent. This what everyone misses. It's never production ready or production intent. And so if we step back a minute and define code review more broadly, it is the most important category in building. It is so important. Everyone is building ten, twelve, fourteen hours a day in Claude code or cursor, whatever. But the amount of time it takes to review and process that and make it production intent is still an order of magnitude more than building. And we have not figured out, we're pretending that this work is complete. It's not. If I could find the best next generation true code review, brother, the best team, I'd make 10 bets because we need it. And they may all get killed by Anthropic. We'll see. But it's much more important than code generation. This is back to Amjad's point. I can rotate between Astra and Fable and whatever. They're all great. Right? And maybe Kimmy if it catches up, but how am I going get into production?
00:30:52 · Rory O'Driscoll
[00:30:52] S1: Agreed. Big picture. It's pretty clear that we're making way more software than we've ever made by probably orders of magnitude. I mean, just looking at the Anthropic thing they did on unemployment and recent that paper they did on unemployment. So given that the whole software development life cycle is going to change, right? Because how that gets deployed successfully, it's probably going to be very different in an agentic world. So I agree, I think there's a whole bunch of compelling related opportunities, not just around code review, but the end to end memory management, testing, sandboxes, Harry, where you and I have an investment. So yeah, I just think, you know, I said it last week, I said, again, coding is the mother lode of LLM value, right? It's where it all happens. And therefore, there's going to be a whole bunch of ancillary opportunities around that. And, you know, there might be 25,000,000,000 so you guys might pass, but if there are $10,000,000 outcome, I will take my humble check and be very glad.
00:31:41 · Jason Lemkin, Harry Stebbings
[00:31:41] S0: Yeah. Maybe I shouldn't call it code review because Rory's point, it might be construed too narrow, but build to prod is the biggest category. Absolutely. Build to prod. How do you go from it's built, it works, it works in dev, it looks great. How the hell do I get that thing into prod? That's where the big money is going to be made now. We, the money's already been made in frameworks for build, and they're great. And let Sam and Dario and friends duke it out every every every day. We all benefit. But how do I get this crap into production? [00:32:06] S2: I wanna move actually to one of the most interesting rounds I thought was Modal closes at a 15,750,000,000 valuation. Run rate surpasses a billion dollars. It's $750,000,000 series d led by Excel. I just actually interviewed Eric the other day. He was amazing, actually, in the studio. How do we think about this round and what it means in terms of the wider inference market? [00:32:26] S0: I like it better than CoreWeave. I like adding value to the universe rather than just being some some outsourced racks of of GPUs. I like this one better even though the... To Rory's point, the competition appears to be infinite and limitless, right? So you better have some cojones in venture growth to do it. But yeah, I like at least adding value to the universe.
00:32:47 · Rory O'Driscoll
[00:32:47] S1: The interesting thing about Modal is they were six... I mean, were always perceived strong by developers, but I think they were like 60 or under 100,000,000 mid late last year, right? And that level of acceleration is just amazing, right? I mean, it's just, it's stunning when you see it. Yeah. So, I mean, that's the first big picture is, my God, inference is exploding here, Right? And yes, they are very developer friendly. They have a whole bunch of products. So yes, that's the takeaway. The other thing I was just thinking about it is, you know, how big could this market be? I mean, I think you look at the four or five key inference providers, and you add them all up, and maybe they're plus or minus 5 or $6,000,000,000 in run rate revenue, which is a lot. But if you think about it, they're all serving all the open weight models in a world where right now, and it's not like with like, the sum of the OpenAI and Anthropic revenues is probably north of $101,110,000,000,000 right now. So by dollars, it's less than 5%. So it just points to the opportunity here to the... I mean, going back to Jason's Replit guy, think about I'm getting at Replit sitting there going, do I want to give money to Cloud Code and give them a 70% gross margin for this token? Or do I wanna buy it on Modal and give them a 30% gross margin for this token? Well, if the tokens are roughly the same, you know what you wanna do. So, you know, it does point to the upside there.
00:34:02 · Harry Stebbings, Rory O'Driscoll, Jason Lemkin
[00:34:02] S2: Completely agree, does. I'm constantly shocked by, like, the infinite expanding size of the inference market. [00:34:08] S1: Absolutely. No, it's stunning. [00:34:10] S2: It's the one thing that I know today that I wish I'd known twelve months ago, because I would've done things slightly differently twelve months ago had I been more expansive around my mindset here. [00:34:18] S0: Well, also you had to be smarter than me to understand how much this revenue could be captured outside of open air anthropic. A year ago, I wasn't smart enough to really think through this. I didn't think enough of it would be captured outside of it, so I didn't think it was that interesting. [00:34:30] S2: But are these inference providers gonna be worth $304,100, dollars 500,000,000,000? [00:34:34] S1: I would think it's a race between two things. You can put your MBA hat on and say, you know, open weight, going back to Jason's comments on CoreWeave, all the Neo Clouds are saying, oh my God, let me get this straight. We do all the building work. We buy all the compute. We borrow all the capital. And then these bozos come in, buy from us, sell it to developers and make a shit ton. Why don't we do that? So, you know, you put your MBA hat, and you can imagine a lot more competition here, right? And then you say to yourself, I doubt, you know, you get those kinds of valuation. On the other hand, when you have this kind of growth rate, nothing else matters. It covers a multitude of sins. My bet is their margins have crept up this year. Right?