The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:47:07 · Erik Bernhardsson, Harry Stebbings
[00:47:07] S0: For sure. Yeah. And I think it's gonna be a tough business in the very long run, but today, you can have extremely good cash flow selling these data sets. [00:47:13] S1: Can I ask, when we think about that implementation, working with partners so closely, you've said, and Lin has said too from Fireworks, about the importance of owning your own intelligence? Can you unpack how this looks? Because specialized models for companies in this way, the kind of jury's still out. You know, we have Harvey who says that it's fantastic and it's been amazing, then you have Legora who say, Ridiculous. The underlying model's moved so fast. It's the wrong strategy. [00:47:41] S0: Yeah. For some stuff, it's good to own your own intelligence. For other stuff, it's not... Like, I don't think it matters. Like, we have a lot of customers that own proprietary models on on Modal, and their customers, you know, they use a proprietary model. Like, I don't think it makes sense for everyone to own their own intelligence. [00:47:54] S1: Why does it make sense for you to versus not?
00:47:54 · Harry Stebbings, Erik Bernhardsson
[00:47:54] S1: Why does it make sense for you to versus not? [00:47:56] S0: I think for certain use cases, you can take an open source model and you can fine tune it, and you can get really good performance. And the nice thing is you know what the fine tuned model is based on, it's not gonna change, like, they're not gonna take away the model from you. It's nice to have that consistency and the ability to like, continuously like tweak it without, you know, the underlying model changing, which has happened in some cases with the frontier labs. That's like, you know, that's nice. Like, you know, I support that, but like, you know, I think there's many other things that matter to people. Owning your intelligence is like just one thing out of many. Like, I think latency matters, think costs matter, performance, I think hackability, I think, you know, having a platform of a lot of adjacent services, like, these things matter too. Owning your own intelligence, like, yeah, I'm supportive, but there's many other things. [00:48:38] S1: Isn't that kind of going against your business? [00:48:40] S0: No, I don't think so. I love [00:48:43] S1: the honesty, but dude, it would be in your favor to say, yes, every company's gonna need it, and we're the partner to help you. I kinda fucking teed you up there, and you've...
00:48:43 · Harry Stebbings, Erik Bernhardsson
[00:48:43] S1: the honesty, but dude, it would be in your favor to say, yes, every company's gonna need it, and we're the partner to help you. I kinda fucking teed you up there, and you've... [00:48:53] S0: Well, I mean, not really. If you think about Typeface with Jav, it's a highly proprietary model. I want people to use Jav. It runs on Modal. So we have many customers that themselves are proprietary model, that are hosting on Modal, that are serving their customers. And I'm very, very in favor of that too. Think the beauty of Modal is always that it's like a general purpose platform, and we support so many different things. That to me is like, you know, the beauty. It's like, you know, we can, if want you to use open source models, like, that's great. Like, we'll help you. And there's many customers that build incredible AI applications on top of open source models, fine tuning them, reinforcement learning, have a bunch of, you know, adjacent sandbox use cases or training, whatever. But there's a lot of companies that have built highly successful businesses, you know, Suno, Runway, Typeface, and many others like running their own proprietary model on Modal, and their customers don't care. And that I think is like, you know, puts us in a really good spot. [00:49:43] S1: I wanna ask two more questions before I do a quick fire. [00:49:46] S0: Okay. [00:49:47] S1: Model routing, as the dear Americans say, is that a defensible business? [00:49:51] S0: What are saying in UK? Rooting? [00:49:52] S1: Rooting. [00:49:53] S0: I love that.
00:49:53 · Erik Bernhardsson, Harry Stebbings
[00:49:53] S0: I love that. [00:49:53] S1: Well, mean, we are actually... The original language, America just took ours and Bostonized it. But yes, my question to you, is that a defensible segment of this value chain, or is that a commoditized product that everyone just builds themselves? [00:50:07] S0: I think it's possible to build a successful business in model routing. I think you can do that today as a standalone product. I wonder if long term it has to be part of a more comprehensive platform. At the end of the day, think what these companies want, they want evals, they want ways to fine tune, they want more control over performance, like latency, throughput, like all these things. And I think it's like one of those things that kind of makes sense today. Like these are very good businesses. I invested in open router personally, and they had a great outcome. I actually think they could have done even better on a standalone basis. But I think in the very long term, it it feels like one of those categories, like, you know... And and... But that's my view on everything in AI. It should really be a part of, you know, larger, more comprehensive set of tools. [00:50:50] S1: Congratulations. You're on the open router board, and the acquisition offer comes in. Please make the case for why they would have [00:50:56] S0: Yeah. Come [00:50:57] S1: Please make the case
00:50:57 · Harry Stebbings, Erik Bernhardsson
[00:50:57] S1: Please make the case [00:50:58] S0: for why. Think OpenRouter, like the growth rate and the revenue, like this is... And and the brand, frankly, like, they have a really strong brand. Mean, I there's a lot of, like, there's 500 other competitors, but but the the space is growing so fast and there's so much revenue I would have told them to keep going. [00:51:11] S1: Final one. I think a really telling question is what do you believe that does not go in the favor of your business? And so for example, I think that seed investing today is kinda dead and bullshit. This idea of like two on 10, or slowly build for eighteen months. [00:51:29] S0: Well, it's kinda bad if you wanna make money, right? But it's great if you wanna develop a relationship with founders. [00:51:35] S1: Sure. But that goes against what I do. I'm just [00:51:38] S0: You're against the relationship with No, [00:51:41] S1: no, I'm saying, I think the death of seed investing, the two on 10 and build for eighteen months is dead.
00:51:46 · Erik Bernhardsson
[00:51:46] S0: Yeah, I understand what you're saying. So what would yours be? I don't know. I mean, think one thought I have is, at some point, this AI stuff is growing so fast, and we're here, and we're gonna go to here, and then there's gonna be a pullback, you know, 20%, 30 in the stock market, everyone's gonna freak out, and people are gonna say it's the end of the world. I'm almost certain it's gonna happen, but, like, I'm so bullish, because then we're gonna keep going. And, like, you know, like, so that would be, like, one thing that I'm like, you know There's gonna be a pullback. I'm okay with that, because I think the long term opportunity is so fucking big. It's, like, so large. Do you take secondaries? Very little. Why? I mean, I personally don't need a lot of money. I'm pretty happy with life, and I have enough. So personally, I actually support it for my employees, though. It's it's quite important, actually, as a founder that you make the equity worth as much as possible, and one of the way to do that and to tell future candidates that, No, this isn't just paper money, this is real money, is to have a precedent of doing employee secondaries. Then you can point to last round, we let employees sell this much or whatever, and up to 10%. Like I think you have to have guardrails. Like you don't want employees to sell too much. You want them to still be very, you know, have a lot of skin in the game and be very incentivized to make the company successful. I But think it's a way to, you know, create a very liquid, hard currency out of the equity.