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20VC (20 Minute VC)

20VC: $3.5BN - The Price Zuck Paid for Thinking Machines Co-Founder | Goldman Sachs Acquires Industry Ventures for $665M | Softbank Borrows $5BN Against ARM Holding to Invest More Into OpenAI

79 min episode · 2 min read
·

Episode

79 min

Read time

2 min

Topics

Productivity, Relationships, Investing

AI-Generated Summary

Key Takeaways

  • Secondary Business Valuation: Industry Ventures sold at 10% of $7B AUM, trading at roughly 10x revenue for a 50% margin business. Secondary and fund-of-funds businesses can achieve full exits unlike primary venture firms because they're productizable asset management platforms rather than dependent on individual partner selection.
  • Founder Commitment Risk: When external offers exceed startup valuations by 75% ($3.5B vs $2B ownership), multi-period game theory breaks down into single-turn decisions. Investors should implement extended six-year vesting with cliff protections and repurchase rights for competitive departures to mitigate this risk in high-value technical talent acquisitions.
  • Portfolio Concentration Timing: Start with 20-25 diversified seed investments at 1-2% fund allocation, then concentrate 75% of total capital into 3-5 winners through follow-on checks of 5-10% fund size. This approach captures option value early while concentrating after revenue validation provides 70% confidence in outcomes.
  • Token Demand Economics: Current AI users could consume 100x available tokens today, with companies reporting 30-50% of engineering built via AI tools like Cursor. Scaling laws have held accurately for six years, requiring approximately 1% of GDP investment to reach AGI, making capacity constraints the primary bottleneck rather than demand.
  • Cross-Fund Strategy: Maintain parallel LP bases across sequential funds to enable cross-fund investing without conflicts. This expands effective capital base from single fund size to combined portfolio, allowing 10%+ allocations to breakout companies without exhausting reserves or creating LPAC approval complications on follow-on rounds.

What It Covers

Goldman Sachs acquires Industry Ventures for $665M, Andrew Tullock leaves $10B Thinking Machines for Meta's $3.5B offer, SoftBank borrows $5B against ARM to invest in OpenAI, and veteran investors debate concentration strategies.

Key Questions Answered

  • Secondary Business Valuation: Industry Ventures sold at 10% of $7B AUM, trading at roughly 10x revenue for a 50% margin business. Secondary and fund-of-funds businesses can achieve full exits unlike primary venture firms because they're productizable asset management platforms rather than dependent on individual partner selection.
  • Founder Commitment Risk: When external offers exceed startup valuations by 75% ($3.5B vs $2B ownership), multi-period game theory breaks down into single-turn decisions. Investors should implement extended six-year vesting with cliff protections and repurchase rights for competitive departures to mitigate this risk in high-value technical talent acquisitions.
  • Portfolio Concentration Timing: Start with 20-25 diversified seed investments at 1-2% fund allocation, then concentrate 75% of total capital into 3-5 winners through follow-on checks of 5-10% fund size. This approach captures option value early while concentrating after revenue validation provides 70% confidence in outcomes.
  • Token Demand Economics: Current AI users could consume 100x available tokens today, with companies reporting 30-50% of engineering built via AI tools like Cursor. Scaling laws have held accurately for six years, requiring approximately 1% of GDP investment to reach AGI, making capacity constraints the primary bottleneck rather than demand.
  • Cross-Fund Strategy: Maintain parallel LP bases across sequential funds to enable cross-fund investing without conflicts. This expands effective capital base from single fund size to combined portfolio, allowing 10%+ allocations to breakout companies without exhausting reserves or creating LPAC approval complications on follow-on rounds.

Notable Moment

Roger Ehrenberg reveals his new seed fund targets 20-25 initial investments with first checks under $2M at $10M posts, then concentrates through $3-5M follow-ons into top performers. One recent deal: $1.5M at $10M post for 15% ownership in an analytics company with multiple six-figure contracts.

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Episode Transcript

Everything in life, you can price as an option. In the face of unprecedented wealth, I'm shocked to discover that most people behave badly. I don't know, man. Something's broken in, I think, the way that we're evolving as humans if everything ultimately reduces to what's in it for me. Would you prefer $2,000,000,000 in thinking machines, unlisted stock with a chance to be amazing on a chance to go burst, or 3 and a half billion dollars of liquid Facebook stock over the next five years? What I'm hearing Rory say is essentially reduce it all to fuck the big VCs. They're playing the momentum game. If shit happens, shit happens. They can handle it. This is life. This is 20 VC with me, Harry Stebbings. It is my favorite show of the week. Jason Lemkin, Rory O'Driscoll, and one of the OGs of seed investing. He just launched his new fund. I never do LP checks. Never. When Roger did his fund, I was begging to be an LP in Roger's fund and also writing my largest ever LP check. Roger is one of the greats. Today, we discuss everything from Andrew Tullock leaving Thinking Machines to rejoin Meta to SoftBank borrowing $5,000,000,000 against their ARM stock to invest more into OpenAI, industry ventures being bought by Goldman Sachs and what that means for the future of venture, and so much more. I want these shows to be the best shows you listen to every week. Let me know what I can do to make it better. Harry at twenty v c dot com. But before we dive into the show today, now most people who get scammed never talk about it. And if it can happen to tech savvy professionals, CEOs, and investors, it can happen to anyone. But the problem isn't just losing money, it's that today's scams, they're built differently for a very new world. One where AI can generate convincing messages in seconds and fake sites look more like real sites than the real thing. Traditional tools were not built for this future and that's why Guardio exists. Guardio is this incredible predictive and proactive engine. It leverages advanced AI threat detection to block highly targeted, socially engineered scams before they ever reach you. From phishing emails and fake login pages to financial fraud, Guardio protects you across the ways people actually live and work online. And security shouldn't be complicated. Guardio continuously monitors across all your accounts and devices, uncovering risks in real time and guiding you to close gaps before attackers exploit them. Trusted by over a million users, Guardio is setting the new standard for personal cybersecurity. Visit guard.io/20vc today to start your seven day free trial because the threats of tomorrow, they're already here and Guardio is built to stop them. And as guard.io protects your clicks, acuity scheduling ensures our time stays on track. This show is brought to you by Acuity scheduling, the flexible scheduling software that helps …

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  • companies reporting 30-50% of engineering built via AI tools like Cursor
  • SPONSORS: Guardio, https://guard.io/20vc
  • SPONSORS: Acuity Scheduling, https://acuityscheduling.com/20vc
  • SPONSORS: Intercom (Fin), https://fin.ai/20vc

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