The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:36:44 · Alex Mashrabov
[00:36:44] S0: Okay. First of all, I think definitely the ability to switch internal use just for internal teams outside of law firms. I think that's definitely happening. Oh, I think we both invest... There is some company called Solve Intelligence. Love it. Yeah. Very specific. Very specific. And let me try to maybe bring a couple examples why, like, solve intelligence is so special and, like, where... Like, for example, how we learn from this. What can happen very often is that a company wanna just control the patent workflow even if they outsource the work. And that's very valuable just to have one system of record. So whoever can create AI native system of records is gonna win. And but going back to Higgs, why it seems so important for Higgs Field? There are so many systems today which are used for just to store assets. Like, some people use Dropbox, Some people use Google Drive. Some people are gonna try to use Miro. Some people are gonna try to use frame.io. Like, there are many solutions. But let's think about what people need. What people need, they wanna be able to search contents, and marketers especially wanna make sure that content is on brands in terms of the visual identity, but also if that sort of adheres to certain brand guidelines. And that's where semantic understanding and semantic controls become finally possible. It never existed before. So in our space, there are definitely other companies like Adobe and Canva who builds the best software for the Pixel for Serra, where everything was defined with pixels. But that's clearly not how the world is gonna work in the future. What we're envisioning, and that's what everyone wants, they wanna just be able to search and really work through the library of assets and all the knowledge through natural interfaces. So being able to own this interface and build the analytics, like this system of records, is important. That's why at Higgs Field, we invested so much in harness so that it improves over the time. And this harness also allows... It it basically learns visual style over the time, which, let's say, Claude and OpenAI cannot necessarily do.
00:38:55 · Harry Stebbings
[00:38:55] S1: Do you believe in moats anymore? You know, you've been around startups for a long time. We always talk about moats and defensibility. I largely think they're bullshit. You know? We we saw Lovable. When I invested, everyone was like, oh, it's a rapper. It's a rapper, you idiot Harry. And, actually, it was a rapper, but it's about speed of decision making, product execution, and building value over time very, very fast. Instinct is a wrapper. Of course, it is. It's not that difficult to do an AI assistant today, which is why there's so many, but they're building incredibly quickly very valuable features, and you build it over time. Do you believe that most actually exist really?
00:39:35 · Alex Mashrabov, Harry Stebbings
[00:39:35] S0: I think it's very difficult to figure out where the value accrues in the supply chain. We do believe that there are only two ways of modern value creation or mods today. First is when you deliver the outcome, and for us, it's allowing businesses to sell more through AI ads. So that's the first thing. And the second thing is network effects. Unfortunately, AI does not replace network effects. And when people talk about swarm of AI agents talking to each other, I'm not sure this is happening in the next five years. That's why it's so exciting that within Higgs Field, we really wanted to empower community to create more projects, open source them, to really build a snowball where people can capitalize on each other output. This is the reason why software grows so quickly because it's so easy just to go and fork someone's project on GitHub. We were able to scale from basically, like, I don't know, 10 seeded projects, open source projects, like eight weeks ago to over 10,000 today. Like, seeing these type of network effects, I believe can become a moat over the time. [00:40:41] S1: When we look at your growth, fundraising is a big part of it. It costs a lot of money to be able to spend 4,000,000 on different aspects of inference spend. What was the best VC meeting you've ever had? [00:40:53] S0: Obviously, Yuri Milner gets gets it. [00:40:55] S1: But you just How was that meeting? Was was it in person?
00:40:55 · Harry Stebbings, Alex Mashrabov
[00:40:55] S1: But you just How was that meeting? Was was it in person? [00:40:59] S0: Yeah. Definitely in person. And definitely Yuri stays on top of all the trends. Was it? Were you nervous? I I wouldn't say nervous. It was just more to see how much of the... If we see the market the same way. And I was truly surprised that Yuri deeply understands this transformation of content first and foremost. Obviously, it starts with this direct to consumer AI ads. It starts with short form dramas. All these trends come from Asia to the West. Also, fundamentally, we believe that most of contents on social and in the world is gonna be AI assisted or AI generated. And this multitrillion advertisement industry, and contextual advertisement is the main business model of the Internet, it's all gonna be substantially disrupted with video AI. This industry still gonna be very valuable, but it's never gonna be the same. [00:41:55] S1: Did you know when you left a meeting with Yuri that he was gonna write the check? [00:41:58] S0: You know, sophisticated investors, they can play games. I had, like, so many scars. People really shook hands, said, We do at this price. And next day, what I learned is that they called other investors and they pulled the syndicates to invest in 30% lower valuation compared to what we discussed. So look, these things just happen, so you never can be sure. But it didn't happen with Yuri. [00:42:19] S1: I think there's a discount placed on Higgs Field because you're not Silicon Valley insider. [00:42:25] S0: Do you
00:42:25 · Alex Mashrabov, Harry Stebbings
[00:42:25] S0: Do you [00:42:25] S1: think that's fair? Like, let's be clear. You're at a billion in revenue now. Yeah. If you were a Silicon Valley company, that would easily be a $25,000,000,000 company, growing at the rate that you're growing in eighteen months. [00:42:37] S0: Yeah, you could also argue that's what Cognition was valued at 50, right? So there is definitely an Upper bound even more, [00:42:43] S1: yeah, a 100%. So a couple of
00:42:43 · Harry Stebbings, Alex Mashrabov
[00:42:43] S1: yeah, a 100%. So a couple of [00:42:46] S0: things which I believe are very important. So first, we build for long term. We have seen that direct to consumer space, like e commerce can be disrupted. Shopify is a great example, how they have become infrastructure to build direct to consumer businesses, and we become infrastructure to essentially build distribution for direct to consumer businesses. That's one aspiration. And second aspiration is obviously Applavin. The company's worth over $200,000,000,000 It's insane. So look, and as we think long term, just these multiples don't matter that much. As we know we're building long term, we're gonna be over 100,000,000,000. It's true that most of the people don't get the opportunity that we are going after the biggest industry in the world, but I wanted to drop another number. And I asked the team to double check, so it's at least four people on the team who proved... So it's not like random fact. So I asked, When we look at public companies and we exclude pharma and big tech, spend on sales and marketing is higher than spend on R and D. When it comes to sales and marketing, the goal is to deliver personalized offering which converts the best. A lot of that is human work, of course, but a lot of that is gonna be personalized videos in some shape or form. So that's why I'm saying that many people just... And that's good for us that many people don't understand the opportunity, this large market, which we go after.