The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
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.
00:53:04 · Harry Stebbings, Erik Bernhardsson
[00:53:04] S1: I totally agree, and as you think about a talent marketplace that's more competitive, it's very It's [00:53:10] S0: extremely competitive out there. [00:53:11] S1: Is it nuts? [00:53:12] S0: It's nuts. It's nuts. I mean, you know, like, the offers we see for... We've lost new grads going to some of the labs for, like, talking 20. I mean, these are exceptional people. Exceptional. [00:53:25] S1: What makes an exceptional, exceptional new ground? You know, like, [00:53:29] S0: just fucking sharp people. You know? These are, like... I I know it when I see it. Like, they're just, you know, they're just extremely hungry, hardworking, do everything about technology. Mean, they go to some of the big labs. [00:53:41] S1: Is that it? They go to OpenAI and Anthropic? Yeah, the [00:53:43] S0: big labs. Yeah. They pay a lot. [00:53:44] S1: But is that where the talent comes? [00:53:46] S0: There's like a few other ones, but I mean, mainly those people are known for paying a lot of money. [00:53:51] S1: And you won't pay that much?
00:53:51 · Harry Stebbings, Erik Bernhardsson
[00:53:51] S1: And you won't pay that much? [00:53:53] S0: We pay a lot. We can go very aggressive. We wanna be out there paying 95... Fifth percentile for... In the market. And there's like a few companies that I know, like, they're probably gonna pay a little bit more. I think we have way more upside in the equity. Going back to what I said about secondaries, I think it's important that for that reason also like to create like a real tangible value and the currency in the equity that makes us, you know, our offers seem very, very strong. Plus the fact that we have a lot of upside. I mean, you said it, right? Like our stock seems cheap. Like I kind of agree, there's a lot of upside in our stock. So that enables us to not necessarily have to match with the labs, but I think, you know, create a compelling sales pitch for why our comp package is, like, basically better than the labs. And we're willing to go very far to get the best talent. [00:54:33] S1: Okay. We're gonna do a quick fire round because otherwise, could talk to you all day. You have a great angel portfolio, OpenRouter. You mentioned Lovable before. You can put all of your money into only one. [00:54:44] S0: I love turbopuffer. I know Simon really well. He's a Danish guy. He's got this Scandinavian connection. Just a fantastic entrepreneur. I just love the business. [00:54:52] S1: How big can that business be?
00:54:52 · Harry Stebbings, Erik Bernhardsson
[00:54:52] S1: How big can that business be? [00:54:54] S0: That's a good question. I mean, it is, like, somewhat specialized. They're doing vector databases. I think it could be a very large category. If I ran that company, I would have 500 different ideas of how to expand into many adjacent things around databases, data warehouses, other types of querying system. Like there's... It could be a large category. [00:55:10] S1: What have you changed your mind on most in the last twelve months? [00:55:13] S0: Probably the magnitude of the Sandbox space. I think it's kind of insane. Like, I look at the revenue, and it just keeps going up. And I'm like, well, clearly has to stop right now. And I think I'm, like, doing some sort of reverse psychology on the revenue because it just keeps going up. I'm like, what is going on? It just keeps growing and growing. And, like, I've been wrong so many times. I'm like, you know, in a good way, like, you know, and and so I... It's incredible how large that space has gotten. [00:55:33] S1: What do you think is the most overheated category within AI today?