The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:43:49 · Jason Lemkin, Rory O'Driscoll, Harry Stebbings
[00:43:49] S0: just like See's candy. [00:43:50] S1: Get a See's candy from the 1960s and get a See's candy from today and you look at them side by side, they pretty much look like the same thing. I don't think that'll be the case for the Evernote product of 2080. [00:44:02] S0: No, but my point is it may be as close as you get in software, the bending spoons model, because they're going to keep these and keep these assets, and invest them. I'm not saying it's the same as a Seas candy. [00:44:11] S1: I describe it as it's conceptually the same idea as Berkshire Hathaway, but perhaps in an industry where the idea doesn't apply. [00:44:18] S0: Or maybe you let... It's like Jane Street putting all the money into whatever his his name, Leo Apuchol. Like Berkshire's like this is close to what we're doing it's not our core we're going to let the Italian guys do it and we'll take a meaningful position and we think they have something that we think that they're going to be able to maintain this incredible growth level because they will have a thousand assets to look at it a year, and we'll be able to maintain them in a way Vista can't. [00:44:42] S2: Guys, you can also guide. We we can do General Atlantic set to IPO. We can do Tesla, the new Roadster, Unbelievable videos of cars that literally elevate themselves with thrusters. We can do benchmark on stage conceding that competition. It's a bit of a flimsy term in Venture these days. Any predilection as to where you wanna go? [00:45:03] S0: You know, I wanted to do the 37 signals one, but We
00:45:03 · Jason Lemkin, Harry Stebbings, Rory O'Driscoll
[00:45:03] S0: You know, I wanted to do the 37 signals one, but We [00:45:06] S2: can do 37 signals. David Harnema Hansen, who is an incredible race car driver, has the most extensive library of race cars. 37 signals made 370,000,000 in profit since 2020. Bootstrapping ain't all that bad. Hey? [00:45:22] S1: I was... Yeah. I was gonna say all... I mean, you know, going back to the conversation at the start, all these software companies, none of the VCs cares. Well, if you hold onto it yourself and pull out $370,000,000 I think you'll be fine. That was a great result. I did not... I knew it was good. [00:45:35] S0: I don't think... I think that was wrong for what it's worth. I think it's directionally correct. I think the point that was making, which is interesting is they say they do 10% profit sharing. Right? So if you do 37,000,000 of profit sharing, it's 10%. Rory can help me with the math. I think that would suggest overall profits for $3.70. I don't think it could make that much money. I'm guessing it does 60 to $70.60 ish million a year. Right. And even if it's, even if 40,000,000 can go to the bottom line, [00:45:58] S1: it's times six. You are two
00:45:58 · Rory O'Driscoll, Jason Lemkin
[00:45:58] S1: it's times six. You are two [00:46:00] S0: forty. It may be in the zone. Right? It may be a little high. But when you look at the fleets of cars and all that, obviously, you know, they've been making this kind of money. I'll tell you a couple of thoughts. One is it's something to reflect on in the era. I don't think we're gonna have a lot of one person billion dollar startups but we could have much smaller teams, right? The one I kind of the one I thought about for the AI era is man Zapier should have been this. People throw out Zapier or Zapier as the one and done example in venture. Like, and for VCs, it's great, right? You raise one round of whatever out of YC. I think there was a quiet secondary round from Bessemer, but really one venture round and you get up to, they're at 300,000,000 in revenue today. Growth has probably slowed, probably not going to IPO as its current company, but a great company that did something generational. What if they raised nothing and the three of us just split 200 of the 300? Like you could do worse. [00:46:48] S1: Yeah, think you could go I [00:46:49] S0: mean, GA guys may make more, but you could do worse, right? So I almost wondered if this one and done, which I used to be a fan of is going to be a trap in the new age. None and done is much better because it's tough to do dividends, And one and done, you can do them right. And one and done, but it's, it's tougher. It's tougher to do dividends with the benchmark team. Right? They're not really that interested in the dividends, are they?
00:46:49 · Jason Lemkin, Harry Stebbings
[00:46:49] S0: mean, GA guys may make more, but you could do worse, right? So I almost wondered if this one and done, which I used to be a fan of is going to be a trap in the new age. None and done is much better because it's tough to do dividends, And one and done, you can do them right. And one and done, but it's, it's tougher. It's tougher to do dividends with the benchmark team. Right? They're not really that interested in the dividends, are they? [00:47:09] S2: Can you not just buy out investors? If you're a Zappier, you just go, listen, guys. Say a five x multiple will will buy you out at a 1,500,000,000 price. You want the liquidity. [00:47:19] S0: It can. It gets... I mean, it doesn't happen that... Maybe we're working up with some examples. It does happen, but it gets expensive to do it from free cash flow. Even if you have a lot of it, it's not that simple. Right? It's not... It can be done. Right? Buffer did it. Expensify did it, but they all did it at pretty mediocre outcomes to the investors. Think Redpoint made like nothing unexpensify, but probably more than if they'd held IPO. It's tough. I like none and done better than one and done.
00:47:19 · Jason Lemkin, Rory O'Driscoll
[00:47:19] S0: It can. It gets... I mean, it doesn't happen that... Maybe we're working up with some examples. It does happen, but it gets expensive to do it from free cash flow. Even if you have a lot of it, it's not that simple. Right? It's not... It can be done. Right? Buffer did it. Expensify did it, but they all did it at pretty mediocre outcomes to the investors. Think Redpoint made like nothing unexpensify, but probably more than if they'd held IPO. It's tough. I like none and done better than one and done. [00:47:41] S1: The reason it's tough is because the only way you can pay... If they own a small percentage of the company, then, you know, one or two years cash flow can take care of it. But if you're trying to buy out an investor that owns 30% of their company, and you want to buy it out for six times cash flow, by definition, you're tying up two whole years cash, so it gets risky if you're doing it with debt. So you're right, these are the hard deals to negotiate. But look, if you needed a million or $2,000,000 to get going, do the deal to start. But yeah, the big picture we're saying is, there are a number of software companies that mightn't set anyone's little heart a flutter, but are kicking off cash and are extraordinarily valuable to their entrepreneurs. And I think that's great. And it just show you not everything has to be through the lens of venture. I want to make 25,000,000,000 or die trying. And it's really good that these guys are making money here.
00:48:23 · Jason Lemkin, Harry Stebbings
[00:48:23] S0: It is in my learning when I compare it to, I just picked Zapier is because they were at 300,000,000 in a generational company in their own way, but probably one IPO. It's like, I used to think this one and done was a Nirvana, right? The three of us get together. We want to start a company. We're first time founders. We don't have the money. We raise a couple million from 20 VCC or whatever, And we just keep growing our company. Right. And it's not a lot of pressure. No one, we don't have to have board members and, but we don't, we didn't, the three of us didn't have the resources to do it. I used to think that was a great outcome. Now in the AI era, I think it's a trap because you can't dividend out the profits as easily. You can't become a 37 signals that easily. Now they they took money from Bezos or others. I'm sure they figured it out. Right? But I almost wonder if no venture rounds is is the way to go rather than one in some ways. [00:49:08] S2: Rory, how do you feel about GA IPO ing? Are we gonna see many more firms IPO?