The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:52:06 · Harry Stebbings, Jason Lemkin
[00:52:06] S2: And I completely agree with you and get that, to be clear. [00:52:09] S0: I think the tough question we could... We should break. I think the tough LP question is... It's hard to be an... I think it's hard to be an LP. Right? Is chasing returns is tough? Because it's very hard, especially at the seed. Everyone wants to chase returns. Right? Everyone wants to be in Sarah's next fund. It's the easiest investment there is. Right? We all, I'm sure it was 50x oversubscribed in one email. Right? And so do you believe and most LPs believe returns decay like we peak at some point in our careers as investors and they and they decay maybe you build a team or whatever. But so do you chase returns or do you take risks that the returns are coming? It's very hard to be to invest in seed manager like And a lot of the best ones have weird strategies. It's complicated. So you have to go pre inception. You have to look for precursors. I think it's actually, in some ways, harder as an LP today than it is in more normal times. Because you're so tempted to chase returns, and you won't get into the next one, because you will you will screen it out. Right? You will screen it out.
00:53:05 · Rory O'Driscoll, Harry Stebbings
[00:53:05] S1: Agreed. Even though it's... You know, chasing with... Funny. Just for the... Stating for the record, mutual fund persistence is almost nothing. In other words, performance, chasing returns in the public markets is a total fool's errand, because the data says persistence is super low. Oddly enough, which makes sense. In venture, persistence is not infinite, but it's quite high, right? Because you get these increasing returns to success until there's some kind of discontinuity, right? So it's not crazy to partially change return, quote unquote, chase returns in venture because of the persistence in a private market. In a way, it's utter folly in the public markets, where literally the dude who bought energy last year might be totally wrong this year because the traders to buy semis. Thinking of you though, Leo. I [00:53:51] S2: much prefer the shows that when we have a little, [00:53:53] S1: what is it? Contour tone. [00:53:54] S2: You know? [00:53:55] S1: Yeah. Contra... Very good, Harry. For for an English person, that's not bad French.
00:53:55 · Rory O'Driscoll, Harry Stebbings
[00:53:55] S1: Yeah. Contra... Very good, Harry. For for an English person, that's not bad French. [00:53:59] S2: Oh, thank you so much. I I I am slightly cultured. I hide it well. Well, okay. Ding ding ding. It's Jason's IC time. We're moving into the world of private markets with factory. Triple valuation to $5,000,000,000, $200,000,000 round. For those that don't know, Factory is an enterprise coding agent provider that can primarily have a droid product, which is scaled phenomenally. I don't think I'm allowed to say their avenues, but they're chunky, and they've done an amazing job. Jason, $5,000,000,000 valuation. Are we going to be doing this round for Mo Driscoll Stebbings, Lampkin Ventures?
00:54:36 · Jason Lemkin
[00:54:36] S0: I think I think this is a good risk to take. First of all, I will caveat. I'm not as much of a factory expert as you. I know it's your your investment this one, Harry, so you're the you're the deeper expert than I am. But there's there's certainly there's certainly one obvious and and one mostly obvious trend. The second one you you got in one of your 20 BC other podcasts this week one obviously the whatever model we have for inference for coding and otherwise it's too low the demand is only going up whether Muse gets it or Factory gets it or Anthropic gets it and I don't know how each token will be monetized directly or whether it'll be FAV but the demand is going to exceed already our most wild models there's a couple things that make me excited about Factory and I just haven't gotten back from the Dreamforce which is one of the world's largest enterprise software conferences all about AI. Two things really stood out and Harry had a guest this week on is which why one of the reasons I recommend the stock. Sovereignty. I want to be able to trust where my data is, right? And I want choice of model. These things really matter. And the one thing I got talking to C level executives at Dreamforce is they don't trust Anthropic and OpenAI with their data. They don't trust it. This is not something manufactured on X or Twitter. They genuinely believe, and honestly, for what it's worth to the IC, I believe this as well. If I upload my confidential data I'm not sure it's not going to my competitors through an LLM. In fact I'm pretty sure it is on some level. I don't think these are these are malevolent companies. This is the way LLMs work. And so I think these are a lot of things that go into factory. This is a crack team. The time is right. You know, Brad Gerstner, that guy's always right from AI to the calcium CT scans. I would always back him. I think we do this round. We pair it with instinct at 10,000,000,000. We roll the dice. It's good times. And this may be one we regret with the musical chairs, but the trends are right here. We need to bet into these trends. Sovereignty, trusting my data, trusting my data at rest, not having it pooled by the big guys. I think in a year, no one is going to trust in the enterprise anthropic and AI with their data. They're solving this too, but this is something we need to bet on. I approve the investment.
00:56:35 · Rory O'Driscoll
[00:56:35] S1: And I'm gonna chime in here having been a little bit more Debbie Downer earlier, and I actually agree with Jason. Right? I think, genuinely, look, one of this... I mean, you made a comment here earlier about some things are obvious, and I actually really believe sometimes stating the obvious is the highest value thing you can do. And one of the statements that we've been saying internally for the last couple of years is coding is the mother lode. Coding, it's everything, right? It's 10x everything else in terms of value being created from AI today, right? So I would argue, you just can't have too many bets on coding up and down the stack. It can be in, you know, it can be coding, can be QA, it can be test, it can be review all across the board. This is where it's going to happen the first and the mostest. And FACT is in a really nice position. I mean, were there are three standal... Because I think Jason's totally right. You're going to want to buy your coding solution, for lack of a better word, which I mean bought a harness and also people from someone who's not also selling in the model because you you no longer believe OpenAI and Tropic are benign if you're corporate America. So I think Jason nailed that one. Right? You worry about the data... Even if you don't think they're gonna blow up the damn world, you worry about the data retention policies, talk about going from the sublime to the ridiculous, right? From the big to the little, right? You're like, okay, they might kill every human on the planet, like they said they would, but they might steal all my shit. I want to have something different. Right? And, you know, Cursor has been swooped off the table. It was a standalone, more individual project. You really only have these guys and Cognition at this point who are basically going to the enterprise and saying what enterprises love, especially big enterprises, I'm coming to you, mister corporate customer, and I will make this go away. You got your board on your ass saying you need to be doing way more coding. You know you don't have quite the people to do it. You need help to get along on that. We need to make this happen. We're here to help you do it. We'll make you... It's good branding, a software factory.
00:58:27 · Rory O'Driscoll, Harry Stebbings
So yes, I think this is a market where even if there is a bump in the world in the next twelve, twenty four months, and I think there could be, going back to Harry, how is the fear actionable? I think one of the things you can do when you're leaning in is leaning into trends that you think will kind of keep on compounding, even if there's a slowdown in overall AI adoption. And this is one. I too would pile in with Mr. Lemkin and think this is coding is the mother lode. It's that simple. [00:58:52] S2: Coding is the mother lode. It's that I'm thrilled. Agree. That's why I did the last