The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:21:02 · Harry Stebbings, Scott Wilson
[00:21:02] S1: And I think this show is phenomenally successful because I do push back. So forgive me because you are an OG, and I'm a podcaster. But, you know, you see Thrive absolutely crush it with OpenAI and Cursor and positions in sizes of outcomes that are just previously never seen before. And we're seeing outcome expansion so real as you've seen with SpaceX. With respect, that would suggest that you could get venture returns on mega funds if in those outcomes. [00:21:31] S0: Yeah. And certainly when you when you get these trillion dollar plus outcomes in private markets even before they're public, it's possible. You know, I, I think if you just think about the dynamics when you double your fund size, right? You either have to double your check size in every company at the same valuation. And we know that doesn't happen, right? They end up pay, it's a, it's a much bigger check, but it's a much higher valuation. So the multiple money's probably not gonna be as good going forward as it has been historically, or you have to do twice as many investments and you know, your 50 bets investment is not as good as your top 10 investments. So you either have to do way more investments, double your check size. And typically, when they double the check size, it comes with, a valuation that's commensurate. [00:22:13] S1: I think they would say they double their check size, but the companies need so much more capital. AI is this exhaustive capital that Venture needed. Finally, we have an avenue to deploy the billions of dollars that you very kindly give us.
00:22:13 · Harry Stebbings, Scott Wilson
[00:22:13] S1: I think they would say they double their check size, but the companies need so much more capital. AI is this exhaustive capital that Venture needed. Finally, we have an avenue to deploy the billions of dollars that you very kindly give us. [00:22:27] S0: Yeah. I mean, they're certainly massively CapEx intensive businesses, but it... It's not clear to me what the long term returns on that CapEx is gonna be. [00:22:36] S1: With respect, given the size of checks that you need to write, are you able to not be in the mega funds? Just when you think about concentration on a per fund basis, if you have to write 50 to $100,000,000 and you don't wanna be more than a 10% of the fund, I mean, you've gotta be in billion dollar plus funds.
00:22:36 · Harry Stebbings, Scott Wilson
[00:22:36] S1: With respect, given the size of checks that you need to write, are you able to not be in the mega funds? Just when you think about concentration on a per fund basis, if you have to write 50 to $100,000,000 and you don't wanna be more than a 10% of the fund, I mean, you've gotta be in billion dollar plus funds. [00:22:53] S0: Yeah. We're obviously in lots of funds that are north of a billion dollars. We're not in any that are north of 10,000,000,000. Yeah. And we we would certainly have a strong bias. I wouldn't say never, but we would have a strong bias that that's probably not the best use to work capital. And we have no problem getting concentrated positions. You know, if you look at our look through exposures, you know, we have lots of significant capital allocated to a small handful of names that, we built up over time in really great companies that we don't need trillion dollar outcomes to have, you know, SpaceX like outcomes. Yeah. It's just a completely different strategy. We, we would rather be at somebody who's small, doing really interesting things in these companies early, and we can partner closely enough with it that we know those companies. We can develop conviction early on and, you know, we can essentially lead some of those middle to late stage rounds. [00:23:46] S1: When is it interesting for you to get involved? Company valuations are soaring so far so quickly today. How do you think about, like... When's the wash you insertion?
00:23:46 · Harry Stebbings, Scott Wilson
[00:23:46] S1: When is it interesting for you to get involved? Company valuations are soaring so far so quickly today. How do you think about, like... When's the wash you insertion? [00:23:55] S0: I mean, we come across at all stages. It's more driven by, like, our opportunity set at the time than than any specific, like, strategy we're targeting this stage of company. But I I'd say we're not good, super early stage investors. That's a really tough skill set that I would say we don't have. So if we can't, you know, talk to customers, understand the product, you know, understand what we think unit economics look like, that's that's something that's gonna be hard for us to build conviction in. So it tends not to be a lot of c or series a. [00:24:25] S1: Does it become difficult as more and more of these funds have IR teams? And so the distance between you and the manager becomes more real, and your ability to get information, get deals becomes more buffered.
00:24:25 · Harry Stebbings, Scott Wilson
[00:24:25] S1: Does it become difficult as more and more of these funds have IR teams? And so the distance between you and the manager becomes more real, and your ability to get information, get deals becomes more buffered. [00:24:37] S0: Yeah. Well, we've... I don't think many of our funds that we're real close to even have IR teams, but, some of them have somebody that functions like our our our guests. But the way we typically do it is more, we're much more proactive. Like, we're not waiting for them to bring us a deal. You know, we're going out and saying, Harry, like, are the five companies in your portfolio that you're most excited about? And then we'll just go out and meet those five companies. And if, you know, if we find one that we think is really interesting, we'd be like, hey, we would love to get involved with this company. If there's a chance for us to help lead the next round or, you know, we've led employee tender offers. We've gotten direct on the cap table. We've done lots of things that, help us get exposure, but that is more offensive than we're waiting for the... Your IR person to call us and say, hey, we have... And we're doing an SPV in this fund. And I actually think, like, there's a huge negative selection bias if you're just waiting for someone to give you a a call and say, hey. We have, you know, $500,000,000 of OpenAI that we're syndicating out.
00:24:37 · Scott Wilson, Harry Stebbings
[00:24:37] S0: Yeah. Well, we've... I don't think many of our funds that we're real close to even have IR teams, but, some of them have somebody that functions like our our our guests. But the way we typically do it is more, we're much more proactive. Like, we're not waiting for them to bring us a deal. You know, we're going out and saying, Harry, like, are the five companies in your portfolio that you're most excited about? And then we'll just go out and meet those five companies. And if, you know, if we find one that we think is really interesting, we'd be like, hey, we would love to get involved with this company. If there's a chance for us to help lead the next round or, you know, we've led employee tender offers. We've gotten direct on the cap table. We've done lots of things that, help us get exposure, but that is more offensive than we're waiting for the... Your IR person to call us and say, hey, we have... And we're doing an SPV in this fund. And I actually think, like, there's a huge negative selection bias if you're just waiting for someone to give you a a call and say, hey. We have, you know, $500,000,000 of OpenAI that we're syndicating out. [00:25:37] S1: Can I ask you, when you review the venture book that you've built in terms of managers, what do you know now that you wish you'd known back when you were at $8,000,000,000 when you were doing the fire sale?