The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:28:32 · Harry Stebbings, Jack Altman
[00:28:32] S3: Do you? Because I invest with a brilliant French partner, Paul, who is, you know, incredibly cynical just by nature of being French, And he wrote this report on a 102 Neolabs, $70,000,000,000 plus raised. And my question is just, like, just how many of them can get acquired? When there were 10 to 12, like, yeah, it'll be okay. 102? We all gonna have downside protection? [00:28:52] S1: It was very easy when all the sort of Neolabs got started and the trend took off to just say, this is total insanity. And to your point, Harry, we don't yet know what the, like, net balance sheet of the whole thing will be. But we are definitely starting to see data points like World Labs and many others where there is real interest. And I think part of what's so different now than certainly any time I've ever seen, there have been other points in history like this, but there are just a lot of acquirers. There are 10 companies that can do $10,000,000,000 acquisitions and want to. And that's just so different. And it's much easier than going public, and it's quicker, and you don't have all of these long cycles and the hand wringing. And that has really changed things. Obviously, extremely impressive run by Martina. It's just shown that in these infrastructure lab type companies, there's a lot of room to run. So I don't know how it will go obviously any better than anybody else, but I'm definitely... I'm hesitant to be too skeptical at this point given what's happening.
00:29:51 · Rory O'Driscoll, Harry Stebbings
[00:29:51] S0: I agree with that. And I think when you deal with the 100, and yes, there might not be 10 or 20 acquisitions, but it's the... This is where people sniff, they use the word consensus in a negative sense. But there is no doubt that credentialism matters, like you got Fei Fei Li, you know, I could write that press release, originator of the whole AI thing, it's a little like, you know, the quality folks at OpenAI Nootropic. So I think the other part of this is, and then LiaLabs, making sure you have the pristine tech asset versus the gritty team. A lot of the stuff I do in the apps level, I love my gritty teams. I think for something like, you know, building a world model, you need to have proven technical success, because that's both what it needs to deliver, and frankly, it needs to navigate and be the desired acquisition candidate. And then I'm not sure that's not true overall, but it's just something I've observed. [00:30:40] S3: I was talking to one of the best CIOs in the world last night, he just said to me, the honest takeaway, dude, you really think you can play in venture with less than a billion dollar fund now? And I... Candidly, when I look at many of these companies here, the first round for this and Fei Fei was, like, 65. I had my team say to [00:30:55] S0: me the other day, we [00:30:55] S3: can't find anything under a 100,000,000. I said, wow. Seed prices are expensive. They said, no. No. 100,000,000 round size.
00:30:55 · Harry Stebbings, Rory O'Driscoll
[00:30:55] S3: can't find anything under a 100,000,000. I said, wow. Seed prices are expensive. They said, no. No. 100,000,000 round size. [00:31:02] S0: Pushing back a little. I I think the weird thing about this tech is... Because I've I've been thinking about this a lot too as a $900,000,000 fund You've got two kinds of businesses. You've got businesses where you can ship a product on less than 400 or $500,000,000 like huge Neolab raises. But you've also got to admit the following, which is also true. You've got companies that use that Neolab and that OpenAI on Tropic technology that are shipping products on relatively little capital in. You know, you guys are in Higgsfield. You run into a bunch of these guys who are like, well, we took $10,000,000, but we shipped the product for $3,000,000. And then the customers took off and shit, we still got $5,000,000 in the bank, but we're going to raise 50 anyway, because we can. So it's not like everything is $100,000,000 just to, you know, spin up some GPUs. There's a whole bunch of $10,000,000 got us a long way. And then maybe we're raising 100, but for different reasons, because we can. Right? So it's not consistent. It's almost two different worlds. And it kinda makes sense. It's the big technology lift upfront from the guys raising 10,000,000,000 is what's setting everyone else up to do amazing shit on relatively little.
00:31:02 · Rory O'Driscoll, Harry Stebbings
[00:31:02] S0: Pushing back a little. I I think the weird thing about this tech is... Because I've I've been thinking about this a lot too as a $900,000,000 fund You've got two kinds of businesses. You've got businesses where you can ship a product on less than 400 or $500,000,000 like huge Neolab raises. But you've also got to admit the following, which is also true. You've got companies that use that Neolab and that OpenAI on Tropic technology that are shipping products on relatively little capital in. You know, you guys are in Higgsfield. You run into a bunch of these guys who are like, well, we took $10,000,000, but we shipped the product for $3,000,000. And then the customers took off and shit, we still got $5,000,000 in the bank, but we're going to raise 50 anyway, because we can. So it's not like everything is $100,000,000 just to, you know, spin up some GPUs. There's a whole bunch of $10,000,000 got us a long way. And then maybe we're raising 100, but for different reasons, because we can. Right? So it's not consistent. It's almost two different worlds. And it kinda makes sense. It's the big technology lift upfront from the guys raising 10,000,000,000 is what's setting everyone else up to do amazing shit on relatively little. [00:32:03] S3: Yeah. Yes. I would say that just Bunny talent costs are so much higher than they've ever been because of a lot of the alternative options for the talent that you can't do a two to three million dollar round anymore.
00:32:03 · Harry Stebbings, Jason Lemkin
[00:32:03] S3: Yeah. Yes. I would say that just Bunny talent costs are so much higher than they've ever been because of a lot of the alternative options for the talent that you can't do a two to three million dollar round anymore. [00:32:12] S2: You know, you know what the challenge to that though, Harry? I agree with the math, and Rory made the point last week, and I wanna hear Jack's thoughts, that I think nominal inflation is like two and a half X in venture since 2010. I might be... I sometimes get my nominal and non nominal confused. All true. But if you look at the undiscovered gems, okay? I think seed rounds, and maybe they're called pre seed or pre pre seed or post inception, but whatever we call it, there's still, what does it take three to four folks to get eighteen months down the road? It's the same thing. And if you're coming out and you're lucky enough to get a million dollars of free tokens from whatever, a 500,000 from Open Air and Anthropic to start a company, you get all these other things. You can still get pretty far for a couple million bucks, especially if you're willing to, I'll share an $8,000 a month apartment in San Francisco. So it's not that I disagree with the math, but the truth is you could do as much, I think, for 2 to $3,000,000 as you could ten years ago. And if you don't have folks dying to give you capital outside of demo day, that may still be the natural atomic amount of capital for what... I get the terms wrong today, but a seed round. It still should be 2 to $3,000,000.
00:33:13 · Rory O'Driscoll
[00:33:13] S0: Yes. In certain mark... I mean, just at the risk of being a patent, yes, in certain markets where you can ship a product leveraging everything else. But, know, it's it's a couple 100,000,000 minimum to enter the neo land space, and it's 500,000,000 to enter the semiconductor space. And, you know, I'm just making a point is that the weird thing to Jack's point, there's such a range of different financing things you got to get your head around. You know, you want to put a 100,000,000 in a semiconductor company to still pre tape out a 2,000,000,000. Let me think about that. And then tomorrow, me look at $5,000,000 for a seed round for a software company where maybe they can get a product out the door and consumer revenue on nothing more.