The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:34:34 · Rory O'Driscoll, Harry Stebbings, Jason Lemkin
[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? [00:35:10] S2: They have. Fireworks are mid thirties now, and they'll be, you know, hitting 50 pretty soon. [00:35:14] S0: Even mid thirties, if it stays there, I mean, the public markets can can tolerate that. It's just the multiple you ultimately get on all of it. Right? There's plenty plenty of folks like that. So it's okay wherever it ends up. Right? I mean, it's important for for Excel, nailing it at 16,000,000,000, but I think it works either way. [00:35:30] S2: Do you think the three kind of hyperscalers of inference are base 10, Fireworks, and Modal? [00:35:34] S1: Probably in some simplistic who's the winner, you're probably right. Those are the three biggest. But maybe the statement is this. I don't think it's like the hyperscalers where no one else mattered.
00:35:34 · Rory O'Driscoll, Harry Stebbings
[00:35:34] S1: Probably in some simplistic who's the winner, you're probably right. Those are the three biggest. But maybe the statement is this. I don't think it's like the hyperscalers where no one else mattered. [00:35:42] S2: Jason, this is a big funding round, but it's too easy for you in the investment committee to decide that you're probably gonna do modal at 15,700,000,000. Yeah. And so if we call an investment committee, there was another round that was announced, which was town at a billion dollars. I think it was a $108,000,000 series b. Are we going to do this from our growth fund, Jason?
00:36:04 · Jason Lemkin
[00:36:04] S0: Well, look, Harry. As you know, I regret passing on Modal and letting the Excel guys sneak in there. They're aggressive, and they're behind in many ways on the AI investments. I mean, they did the deal over the weekend. You know, I asked for one business day and I didn't get it at Edmodal. Modal was, you know, by all intents, it was cheap. Yeah. I mean, 3,000,000,000 to 1,000,000,000 in five months. At the end of the year, we end up at 1,400,000,000 next year, 5,000,000,000. Even if the margins never hit the 40s, we make money on this deal. Like there's just no question about the markets crash. Town, I'm gonna pass on Harry, and if you and Rory and the rest of the team want to do it, I'm fine with it. You know, a billion today is the new 100,000,000, right? A billion is just the entry point for like a classic B round. In the old days when the three of us met, series B investors used to say as long as it's a 100,000,000 or less it didn't matter because the classic series B wanted a billion dollar plus IPO. They wanted their 10x, so a 100,000,000, 80,000,000. They didn't care, right? So a billion is the new 100,000,000. Do I, do I, town has no data? It's sort of interesting revenue that it has a smart team. This is just a bet. This is just an old classic series A series B with a bow tie at a billion. And if this is one of the 10 you want to make in the next twelve months, just do it. I just consider it a chip and I don't need to be at the rest of the meeting. But there's just not enough here for me to get excited either way. Bunch of guys from Plaid. I mean, it's a great one, but we wouldn't even do Plaid today. Don't even see a $25,000,000,000 exit for Plaid, so I wouldn't even bring it to the IC. It's too early to predict, right, where it's gonna go. It's too early. It's just a classic bet.
00:37:34 · Harry Stebbings, Jason Lemkin, Rory O'Driscoll
[00:37:34] S2: So we're not doing it, Jason? [00:37:35] S0: Well, the good news is the team only predicts it needs about 500,000,000 of inference over the next twelve months. So that's much better than the Instinct team, needs 5,000,000,000. So in a sense, I like it for the fun because we were a little more conservative than our peers. So all we need to do is round up some of our SPVs and put in another 500,000,000 to fund the inference. So in the sense, there's a positive here, right? Because I'm glad we passed on instinct even though we look like fools because I don't know who's gonna fund this bad boy. At least Town, again, they only need 500,000,000 over the next twelve months. So so if we're about protecting our downside, let's do it, guys. I just I just don't know. [00:38:07] S2: Would you rather do Instinct at 30,000,000,000 or Town at a billion? [00:38:11] S0: All I wanna know is maybe we can get back into Modal at 20. I... We just blew that one over the weekend. The Excel guys, they're just aggressive. [00:38:17] S1: I think that we should put this clip in the vaults. And two years from now, when you realize that a billion dollars still really is something, we can just revisit this discussion. Whenever we're throwing blightly around numbers like a billion dollars, I mean, there's only... Yeah. I mean, we... It doesn't sound like a lot. There's only four or 5,000 billionaires in the country. It's real money. Right? And that's for 30,000,000,000. It's pretty damn scarce. But...
00:38:40 · Jason Lemkin
[00:38:40] S0: Well, you know what? You know what? You know what? What? Was thinking as I was writing my LP report last night. I... For all... It goes to the next point on on Harry's list, Andruil at 90,000,000,000. Right? And and what I was thinking about with with town and all these is listen, Andruil is clearly a generational company. Right? Got got in early on next generation defense, clearly deep, has the contracts, has everything. Right? But is this thing worth 40 times revenue with the margins and everything it has? And it's like, I think the meta question is, are a bunch of the rounds we're doing, and maybe modal isn't one of them, are they so disconnected from public comps that we either need these massive public comps to recorrect, right, in a way and have the anthropic do? Or some of these deals just make no sense, even though the companies are great. Does Andro make any sense at $90,000,000,000 Does this town at a billion make any sense? I mean, when Braze was just the best exit in the whole public GTM category at six times revenue, Monday's at two, HubSpot's at two, Klaviyo's at two, two times revenue growing 20 something percent, right? I'm not saying they're the same, the growth is here, but I do wonder if some, the multiple, here's my point, if the multiples are disconnected from where they will land, the multiples, and that's just venture, right?
00:39:53 · Rory O'Driscoll, Harry Stebbings
[00:39:53] S1: I mean, my comment would be this, I think that's almost certainly true. The multiples are disconnected. And the only thing that kind of makes that plausible is the growth rate. Look, if you're a mature defense contractor doing 2,000,000,000 in revenue, you're worth $8,000,000,000 best case. If you're a $2,000,000,000 revenue defense contractor and you've doubled for the last couple of years, and you think you've got a line to the administration for the next five or the Pentagon for the next five years, then maybe you go two, four, eight, 20, and you justify the valuation. So it's not impossible. But to your point, Jason, it's leaning in a lot into the future, but a lot. And all these valuations, you you could wake up one day inside amazing companies just priced wrong. Because it's, you know, of all the things that are likely to bail you out, because you mentioned one other in passing, it's highly unlikely that The US market, you know, which is trading at enough, you're not gonna get huge multiple expansion from here that saves you, I would guess. [00:40:47] S2: Does it not go back to the point that Jason made earlier about the need to move large amounts of money? And, actually, if you need to move a billion or 2,000,000,000, I agree with you totally on the multiple compression you're gonna get from here. But, you know, is there a chance it's a $200,000,000,000 company? Yeah. Not not impossible. So it's a 2.2, 2.5 x. And and you moved a billion to 3,000,000,000.