The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:15:11 · Harry Stebbings, Parag Agrawal
[00:15:11] S1: Do you agree with the consensus view that you'll have 90% of token activity go through open models, but 90% of dollars go through frontier models? [00:15:21] S0: I don't think it'll be 90% on either of those two, actually. Why? So if you believe my claim that a useful model and the frontier model will be 100x, 1000x often price from each other. So this model is still useful. It is hard to know which use cases over time will get optimized to which scale of model in between. And I think that is a real path dependency in terms of where open models end up. I do think if we had strong confidence that an American built open model was going to be state of the art as far as open models went, I would have more confidence in saying that they'll be pretty good. Do you have confidence in American open models? I want them to exist. So far, it's not clear what's going to happen. But I'm hoping that there will be a great series of American open models and perhaps even competition to have the best American open model. I think what you need is actually not just one person motivated to build an American open model. You need two people competing against each other to build the best American open model. Do you [00:16:28] S1: think there's value in the model routing layer, routing layer as Americans call it? Some people think immense value. Some think commoditization.
00:16:28 · Harry Stebbings, Parag Agrawal
[00:16:28] S1: think there's value in the model routing layer, routing layer as Americans call it? Some people think immense value. Some think commoditization. [00:16:37] S0: Again, there's path dependency there. So today, there is real value. Today, there's real value because when we say routing, we talk about two different dimensions. Which model and which GPU running that model by which vendor? When you're in a world where the demand supply is very feared, People are like hunting for GPUs and people need capacity to serve their customers and people. All of these are like us, like relatively early stage startups growing really rapidly, sometimes beyond what your forecast or predictions say. And then all of a sudden you're looking for capacity. And so you want to be able to get it where you can. And so that creates real value in having some of these routers as log in, they can solve these two problems saying, give me flexibility if I need to get a different source of tokens and push comes to shove. There's no tokens on this model in the SLA I want. I'll switch models as well. So in this moment, it's really valuable. Now, I don't know what happens to overall demand supply on GPUs and tokens. But if it remains this way, the routing layer is really valuable. What do [00:17:44] S1: you think is not so valuable today that will be incredibly valuable in three to five years time? Perhaps data.
00:17:51 · Parag Agrawal
[00:17:51] S0: I think today we don't know how to pay for unique valuable insight or data. Because as intelligence is cheaper, you're going to want to build upon either data or insight that comes from somewhere else with your unique data. Right? So what... Like, if you think of like an abstract notion that, okay, I have intelligence here. I want some data. You want some data and there's some data in the public domain. If we can pull together your insights and my insights and all of this data in the public domain and intelligence on top, we can create something bigger than what you could have done by yourself, what I could have done by myself. So now how do you transact to create this sort of whole that is bigger than the sum of what you could have done yourself and what I could have done or what OpenData was good at. And so that transaction feels like a data transaction to me or an inside transaction to me. And so we don't yet know how to transact that way. So we fall down to, okay, all I can do is use my data and use OpenData and let's see what I can do with it. But if we figured out better ways of pricing data and good things will happen, but it's not something that's yet a market. But what I'm talking about is data transactions at inference time. So it's not necessarily training time. We are building knowledge. Let's let's take an example of today's world, for example. Let's say in your job since I'm sitting with the VC, you probably have access to a pitch book or like a product like that to collect data. And so you you get grounded in knowledge of what's happening and you get to use that data to figure out how to make decisions in addition to all the the notes you have and deal memos you've written perhaps over the years or insights you've had about, like, how to choose founders. And you're essentially composing insights from your personal lived experience, your notes, public data to make decisions. Now you pay PitchBook by the seat, but now you're running a bunch of agents. And your agents can perhaps not access everything you can on PitchBook. All you're doing, like, sort of this to get a browser, perhaps against terms of service to send agent via browser to PitchBook using your auth credentials. And it's inefficient. Inefficient. It's clunky. Right? But clearly, their data is valuable. And clearly, your agent should have convenient access to it.
00:20:08 · Parag Agrawal, Harry Stebbings
So if we figure out how valuable pitch book data is for your agents to make your decisions, because Because, clearly, you're investing a large hundreds of millions of dollars. So, clearly, you presume that you make a great return on that. So this data is truly valuable if you depend on it today. So you should be able to figure out how to compensate PitchBook for the data even when agents use it, which is not by the seat. If we figure that out, it'll be a huge market and agents will be better off. If we don't figure it out, you're gonna be in this weird cat and mouse game. Off. PitchBook being like, no. I wanna sell you a seat. I'm gonna shut it off. And your agent is stuck without the data, and then, like, you're involved in, like, pulling data. [00:20:51] S1: I think every big company has the choice today of do we let agents in or do we keep them out? And Amazon has said, I'm sorry. In most recent times, Muse, you will not be let into our garden. Shopify has said, come in, baby. Expedia said, come in. How does this play out?
00:21:08 · Parag Agrawal
[00:21:08] S0: I think eventually, everyone has to let them in. The question is on what terms? So how do you align incentives for everyone? And people are gonna have to play their strategy games on how they win in this new world. Literally, the customer is changing in front of our eyes. Right? Like, the customer used to be a human. You're building products for humans. Now you're building products for agents. All you're building agents. And so now you have to figure out what your place in this new reality will be. I don't know if there's a right or wrong answer here. It also depends on sort of how much market power you have. Do you think Amazon were right to say no to Muse? Depends on what they do next with it. If it turns out that they have sufficient market power to have Muse or other agents connect to them differently perhaps over time or ship their own agent and drive crazy adoption. Let's say they have that capability, then I guess they were right. Right? On the other hand, once they've made this, they're not gonna allow anyone else's agent And they cannot ship an agent that consumers use, and they won't allow anyone else's agent to use them. And a lot of the transaction economy starts moving off of to agents, which are all big ifs, by the way, then it would be a bad move. Now I'm betting on agents. I have mixed feelings around agents and what fraction of ecommerce transactions they do. Like, it's unclear. Right? Like, it's...
00:22:26 · Harry Stebbings, Parag Agrawal
[00:22:26] S1: I... Do you think it's unclear? I think it's unwaveringly clear. Maybe I'm super early on the adoption curve, and I buy everything through instinct now. Other than holidays and a home Yep. I'm literally just everything through instinct. Mhmm. [00:22:39] S0: So so me too. But I also know a lot of people who like to buy things themselves. And, like, listen, we want to delegate to agents things which we see as chores and uninteresting and not delegate to agents things that give us joy or pleasure or make us have fun doing those things. And I know people who don't want to delegate shopping. They wanna delegate a lot of things in their life. They don't wanna delegate shopping. And so that's why I don't know the distribution of these people and how behavior changes, but it might be people give away a lot of other chores and then spend a lot [00:23:09] S1: of time shopping. One thing that does worry me is actually the dissolution of the advertising industry in the wake of agents. If I have... You know, if I order my delivery and my Uber, DoorDash for our dear American counterparts through Instinct, that Uber banner that's now advertising something becomes worthless. Amazon, their advertising business is bigger than their e com business now. Of course, they're shutting it off because if agent's the primary customer, your ads business goes to next to nothing. Correct.