The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:09:21 · Harry Stebbings, Erik Bernhardsson
[00:09:21] S1: Is this not the generation, though, where actually capital is the moat and you need so much more money than you think? You said that VCs wanna give you more money than the company needs. I thought AI was finally the output exhaust for venture dollars that was needed. [00:09:34] S0: I think there are times in the market where you are capital constrained. We have not been capital constrained for most of the time of the company. We've been extremely capital efficient. We burn only a few million a month. I mean, like, know, it's a lot of money, respect for the money. [00:09:47] S1: You burn a few million a month? [00:09:48] S0: No, I mean, up until like last year. Now we have to spend a lot of money on capacity. [00:09:52] S1: How much do you burn a month now? [00:09:53] S0: A lot. I mean, we actually are profitable on a P and L basis, but cash flow is quite negative, because we have to spend a lot of money on getting GPUs and building out capacity. And so that is a different period in the company and how we think about capital. Capital is I don't want to call it a moat because, you know, I feel like people throw around that word, like, to mean things that kick Mote to me has, like, a very strict definition. But it certainly helps. Capital helps at this point. [00:10:17] S1: What's the moat definition for you? [00:10:19] S0: I mean, moat to me is like you go read like Seven Powers [00:10:22] S1: or like one of those Love Seven Powers.
00:10:22 · Harry Stebbings, Erik Bernhardsson
[00:10:22] S1: or like one of those Love Seven Powers. [00:10:23] S0: It's a good book. But I I think, you know, then people read that, and they get delusional, like... And, you know, they're like, yeah, we're starting this company. It has all these moats. You never had moats in the early days. Like, you know, like [00:10:33] S1: Google could do anything they wanted to. [00:10:35] S0: Google could do yeah, but it's also like, you know, like what are the seven I don't even remember. It's like cornering resources, like market power, like whatever. It's like none of those things happen until you're like ten years in, you know? There's an old blog post, I always come back to it by Ben Thompson. It talks about Snap and the like, the gingerbread man strategy. Do you know this thing? And it's like, the whole point is like, Snap doesn't have a moat, they just run faster. Like, they're the gingerbread man. And I actually always come back to that. I think that's so true, like, for almost every startup these days. It's like, you just have to, like, move faster than everyone else. [00:11:04] S1: I actually think the three things that matter to say when I invest is like, one, team. Are they top 1% team? Yeah. Two, speed of product decision making very specifically. You look at Instinct today. The speed of feature shipping is really very impressive and they're very, and then three is brand. Yeah. And I think those are the three determinants to me of defensibility, moat, but it's a kind of package.
00:11:04 · Harry Stebbings, Erik Bernhardsson
[00:11:04] S1: I actually think the three things that matter to say when I invest is like, one, team. Are they top 1% team? Yeah. Two, speed of product decision making very specifically. You look at Instinct today. The speed of feature shipping is really very impressive and they're very, and then three is brand. Yeah. And I think those are the three determinants to me of defensibility, moat, but it's a kind of package. [00:11:25] S0: Yeah, I mean, again, I don't know if I would... But I kind of agree with your point. I think brand, I don't wanna call it a moat, but it's actually, I think the value of brand has gone up a lot. [00:11:34] S1: Can I be a dick? [00:11:35] S0: Yeah, please. Do you [00:11:36] S1: think Modal have done well with brand? [00:11:39] S0: I think pretty well. I think we have, it's coupled with the developer experience, and the product, and the website, and the visual identity, and all these things. We just did an event in San Francisco, and I thought a lot about that, sort of how we package it, the event, and the visual look and feel and [00:11:52] S1: But like, do you think you have a bigger brand than Baseten and Fireworks?
00:11:52 · Harry Stebbings, Erik Bernhardsson
[00:11:52] S1: But like, do you think you have a bigger brand than Baseten and Fireworks? [00:11:55] S0: I think we have that. I think we have like really, really good vibes. Like, I'm terminally online. Like, people tweet, like, way more about Modal. I think there's, a little bit more of a community. I think there's, like, much better vibes around us. Like... But, like, I am paranoid about those companies. Like, I am paranoid about competition. Of course, I track it. Like, I of course, like, I I see everything that gets tweeted and about our competitors, and this is important. Like, everyone wants to be a part of the community. Everyone... You know what I think is, like, people misunderstand is I I love TypeSafe with JEV. Yeah. Because, like, everyone wants to clone JEV. No one wants to get up on stage and wear a fucking pink fur coat just, like, talk about the Jevolution in an unhinged way. That is what brand to me is. Like, it's... Like, that guy is, like, he's playing the game on a whole different level. And and I think it's just, like, so, like, true about, like, companies today. Like, you have to [00:12:39] S1: think about that. What... So can you just unpack why? Because he's authentic and different?
00:12:39 · Harry Stebbings, Erik Bernhardsson
[00:12:39] S1: think about that. What... So can you just unpack why? Because he's authentic and different? [00:12:43] S0: I think so. I I think you just have to create a personality. You kind of have to, like, figure out, like, what is the personality of your company, and just be consistent, and create, like, almost like a sense of movement, a sense of, like, community. Like this is something cool, and people want to use you because you're one of the cool products out there. They're like, have you tried Modal? It's pretty cool. [00:13:00] S1: What what has Modal done then that base ten and four OS haven't to build that? [00:13:04] S0: I think we started with the developer experience. So that was... And we had a very clear sort of PLG product market fit, product led growth, in the sense that people came bottoms up, they just sign up on a product. Like, I think the consumer background of coming from Spotify is very important in how I thought about building what's now a B2B company, selling tech effectively. In a way, it's like a very boring category, but I think, you know, like, having personality and having, you know, a little bit of an edge is a big part of how you create that sort of movement and that sort of like sense of excitement and the feeling that you're different. And I wanted to start the moment you go to a website, and the moment you try the product and you just feel that it's different, that magic moment.
00:13:04 · Erik Bernhardsson, Harry Stebbings
[00:13:04] S0: I think we started with the developer experience. So that was... And we had a very clear sort of PLG product market fit, product led growth, in the sense that people came bottoms up, they just sign up on a product. Like, I think the consumer background of coming from Spotify is very important in how I thought about building what's now a B2B company, selling tech effectively. In a way, it's like a very boring category, but I think, you know, like, having personality and having, you know, a little bit of an edge is a big part of how you create that sort of movement and that sort of like sense of excitement and the feeling that you're different. And I wanted to start the moment you go to a website, and the moment you try the product and you just feel that it's different, that magic moment. [00:13:42] S1: Can I ask you, we've spoken about the three different providers there? Inference as a market has many different speculators commenting on it. When you look at the next five years, how does the inference market play out?