The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
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.
00:42:46 · Alex Mashrabov, Harry Stebbings
[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. [00:44:09] S1: You've mentioned Asia short form dramas a lot. What percent of revenue is from Asia versus the West?
00:44:09 · Harry Stebbings, Alex Mashrabov
[00:44:09] S1: You've mentioned Asia short form dramas a lot. What percent of revenue is from Asia versus the West? [00:44:15] S0: So all the West makes well over 70% of revenue. [00:44:19] S1: Well over. [00:44:20] S0: But just important to say that we learn a lot from trends coming from Asia. Hicksville does not exist in China, for example, which is massive market for AI. The largest city by usage is Seoul in South Korea, while the largest country is obviously The United States. [00:44:36] S1: What's the biggest lesson from Asia that you've learned? [00:44:40] S0: There is so much IP, so many products coming from Asia, and they all try to figure out distribution direct to consumer. That's why they lean into the new tooling like Video AI, which actually helps to achieve that. That's just a very different mindset. They feel that they could do way better if they could establish direct relationship with customer instead of having some other layer. That's why they go so so my direct to consumer rather than using some resale platforms and so on. [00:45:09] S1: I sacrificed a lot of life for the life that I have and the career that I have, and I love it. Do you think you will one day regret spending a day with your son in three and a half months?