The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
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.
00:41:07 · Jason Lemkin
[00:41:07] S0: I just wonder... And listen. Whoever's doing this tender, these are very sophisticated investors, of course. Right? Let's not be... Let's not make fun of it. But I do wonder if some, we are just taking revenue multiples too far today. I'll give you a different example. Was like, like profound or Harry's and peak. Right. These are interesting companies. Right. But when you, my God, when you look at the CA the public comps are trading at two times revenue. And you can say, no, no, these are agentic guys. These are agentic players on high growth. But when the growth even just slows to 70 or 60, will it trade at a Cloudflare revenue or will it trade at a better than Braze revenue, right? Which until today was trading at three times revenue. It's not, I'm not, I get the growth side, it's the job we're in. But I do wonder if the AI versions of low multiple companies will settle too early into the multiples of their of their peers. I just don't know. Right. Because I think they're being punished. I think the whole marketing category is the worst public category without question. Right. They're not dying. HubSpot and and friends are not dying. Klaviyo is not dying. They're trading below three times revenue. I would have a hard time getting the IC excited about it.
00:42:14 · Harry Stebbings, Rory O'Driscoll
[00:42:14] S2: Jason, speaking about multiples and how public markets think about multiples where they're appreciated, where they're not, A fascinating one for me was actually Berkshire doubling down on Bending Spoons. Obviously, bought $330,000,000 of new shares, caused a massive bump in the stock price. And the assets that these... That Bending Spoons is buying are traditionally slightly challenged assets, slowing growth rates, not the darlings. And then the price premium that's being placed on Bending Spoons, the holding company right now in public markets is enormous. I'm just intrigued, boys. How did we think about this? [00:42:48] S1: Did not expect us.
00:42:48 · Rory O'Driscoll, Jason Lemkin
[00:42:48] S1: Did not expect us. [00:42:49] S0: I think it makes sense. I think I think Bending Spoons is like the Berkshire version of software, right? It's like C's candy or Coke. Like they're trusting that the boys have... This is not... They're not flipping them. These are holding companies. Warren Buffett wanted to hold C's forever, right? And Bending Spoons is saying, listen, we're going to be diligent. We look at a thousand deals a year or whatever you have. What is it Harry? 5,000 deals a year. We're to do five or six. And we're going to find enduring software assets that we're going to hold for as long as we can hold them. And if you actually step back for a minute, the quality assets is improving. Vimeo, kind of a dog that they kept. I mean, Evernote, kind of a dog. Now they made them work with price increases, right? They're gonna make money off both those deals, right? Eventbrite, kind of a dog. Like Mira on Airtable, I'm gonna argue better. And so I think Berkshire is saying, listen, you're gonna make these into a bunch of C's candies and Coca Colas, and folks think you can't make them enduring, but you're gonna make these endure for a decade or longer. Maybe I'm wrong, but I think they ultimately probably see some similar attributes that they can make these long lasting assets. [00:43:49] S1: Yes. It's [00:43:49] S0: just like See's candy.