20VC: Benchmark vs a16z: Why Stage Specific Firms Win | Windsurf Sells For $3BN | Decagon Raises at 100x ARR | Do Mega Funds Win the Future of VC | What Does Harvard's Losing Their For-Profit Status Mean for VC
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Key Quotes
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Topics
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Insights
🎯 Summary
20VC Podcast Summary: Benchmark vs. a16z, Mega Funds, and Market Shifts
This 71-minute episode of 20VC, featuring Harry Stebbings alongside guests Jason Lampkin and Rory O’Driskel, centers on the evolving landscape of venture capital, specifically contrasting the performance of stage-specific firms (like Benchmark) against the rising dominance and strategy of mega-funds (like Andreessen Horowitz/a16z).
1. Focus Area
The discussion is firmly rooted in General Tech Venture Capital Strategy and Economics. Key themes include the performance metrics of focused vs. multi-stage funds, the impact of massive capital pools on deal pricing, the psychology of exit decisions, and the necessity of early-stage involvement for later-stage success.
2. Key Technical Insights
- Hit Rate vs. Absolute Wins: A core comparison was drawn between Benchmark’s historical high hit rate (e.g., 10% on 63 Series A deals) versus a hypothetical mega-fund’s lower hit rate (e.g., 2% on 454 Series A deals). While the focused fund wins on percentage success, the mega-fund often wins on absolute dollar value of wins due to sheer volume.
- The “Bundled Good” Phenomenon: Venture capital, particularly at the seed and Series A stages, is increasingly becoming a “bundled good.” Investors must offer a full suite of services (and capital across stages) to compete, as founders prefer the convenience and deep pockets of multi-stage partners over specialized, smaller checks.
3. Market/Investment Angle
- Mega-Fund Dominance: The consensus leans toward mega-funds winning the next decade because they control the necessary capital to participate in trillion-dollar outcomes and can afford to pay premium prices (e.g., 10x ARR valuations) at early stages to secure access to later rounds.
- The Cost of Capital Advantage: Mega-funds have an extremely low cost of capital relative to their fund size, allowing them to “shit on” smaller firms by overpaying early on, knowing they can recoup and profit massively in the subsequent, larger growth rounds (Series C/D).
- Letting Winners Run: A critical investment lesson discussed was the danger of becoming risk-averse after a significant early win. Panelists stressed that the final doubles (e.g., turning a 10x into a 20x or 40x) often generate the majority of portfolio returns, making it crucial to maintain conviction in top performers.
4. Notable Companies/People
- Windsurf: Mentioned in the context of a potential $3 billion acquisition, highlighting the massive outcomes achievable in the current market, even if the initial valuation seemed high.
- OpenAI: Referenced in the context of the Windsurf deal, illustrating how large acquirers are willing to pay significant premiums to secure key AI capabilities and talent.
- Benchmark & a16z (Andreessen Horowitz): The central comparison point for stage-specific vs. multi-stage/mega-fund strategies.
- Josh Coppelman: Referenced for his work on the “Venture Arrogance Score,” which implicitly questions the long-term sustainability of mega-fund returns despite their current market power.
- Johnny Bryan Singhaman: Quoted regarding the immense value of the “final double” in venture returns.
5. Regulatory/Policy Discussion
- Harvard’s Loss of For-Profit Status: This was listed as a discussion point, though the summary does not detail the specific conversation around its implications for VC.
6. Future Implications
The industry is heading toward a bifurcation where mega-funds secure the majority of the largest outcomes due to their capital advantage, making it increasingly difficult for stage-specific firms to compete at the Series A level without also engaging in pre-seed/seed investing (i.e., becoming “bundled”). The long-term question remains whether these mega-funds can generate sufficient relative returns for their LPs over 10+ years, or if specialization will eventually reassert itself.
7. Target Audience
Venture Capital Professionals (Partners, Principals, Emerging Managers), Fund Strategists, and Founders seeking insight into current competitive dynamics and pricing pressures in the private markets.
🏢 Companies Mentioned
Clana
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FinTech/Lender (Potentially DeFi adjacent)
Shopify
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E-commerce/Platform (Web3 adjacent)
OpenAI
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AI/Tech (Borderline)
Europe Eleanor
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unknown
Amazon Q
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unknown
Josh Josh
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unknown
Coe Ratman
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unknown
China I
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unknown
Western Europe
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unknown
ARR HubSpot
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unknown
Yamani Rangan
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unknown
SAS I
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unknown
Brat Taylor
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unknown
Harvard I
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unknown
Stanford I
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unknown
💬 Key Insights
"mode mobile created the earn phone the smartphone that pays you for daily activities instead of big tech profiting billions from our attention"
"no one has achieved the market share that it would require to make this math work for venture investing"
"I was literally talking with Yamani Rangan from HubSpot last week this is HubSpot she said now at HubSpot with cursor they are pushing out so many features they can't put them into production anymore she wasn't kidding they're said they're 50% more productive at HubSpots a big F and deal okay the fact that HubSpot now is develop more features than they can push out think about that when you think you have a stable state"
"I least think it's much riskier than I thought a hundred days ago much riskier not being binary I'm saying it's much riskier that there isn't this stable state at the 14th electron or whatever it is like that the stable state no longer exists"
"AI can maim leaders even if doesn't kill them and that can take them off the IPO track that can destroy venture investing instead of 50% at 500 million you're growing 30% at 300 million because you got maimed you didn't die but man you know longer can IPO that's terrible"
"I think there's a bit of VC old school hubris here which is that it's killed versus maimed I think once you're embedded in a workflow once your core once your core it's hard to rip out okay it takes time but what happening with AI is people are looking more often and deals are more competitive and there's more pressure on pricing at downgrades"
📊 Topics
#artificialintelligence
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#startup
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#investment
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#generativeai
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#aiinfrastructure
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🧠 Key Takeaways
be thinking of that feel unnatural to us and if you're not even he's asking that question you miss in the point conversely on the other extreme if you start drifting off and doing every new thing you'll probably also screw up because you'll lose what you have but that's the challenge of being an investing manager in 2025 if you just stick to the same old boring shit you could be done and if you lose the plot entirely you could blow all the money and you got it for the needle I've just let a deal for a vertical sass for dentist rory so I'm at the cutting edge of AI thank you very much you know good market they have the whole imaging stuff oh yeah yeah I'll show you the A because you're so nice you're all sweet you're all I know there has to be something good come out of this you know the one about decagon the meta question I have done a lot of invested in support and know a lot about AI in it it's just like this true of Windsor 2 but the defensibility is confusing but I think what they're good at is doing strong enterprise deployments like getting it done get doing the heavy lifting I think is I just tried the one on notion and sub stack were on it it couldn't answer my generic question but that's not it's not it's strength right I asked notion how to embed my AI in notion and it said the team will get back to you in a day okay so I have a lot of the data I'm on the board to this come to call gorgeous which is the biggest support in e-commerce and I see all the data and they have all the data for all the vendors gorgeous is biggest challenge is that objectively they are the best but the gaps are narrow the gaps narrow and I and listen ripping out support does a big deal it's not going to happen in the enterprise every years right but I do this modes versus momentum thing even though it's venture and non-manclature I think about this a lot modes versus momentum decagon is cool but if if a quadra con or dodecagon is better next year I don't know I just don't know right I hear you but yeah what I'd make is this there are times when market windows open and there's a couple years where you scary through and there's no mode at that particular point in time but momentum begins its own mode I do believe let's just say fast forward two or three years I'm going to argue the following that the state of the customer service market will be like this gorgeous a one or two of the old guard will add enough AI and be really relevant in to calm gorgeous a few of those they'll be thirsty new companies trying to do it but I'm going to say decagon and Sierra we have observed in the phone side of it two or three of them make critical mass and explode I think at some point when you become the safe choice windows shut and the opportunity to walk through it so I don't think that those companies will get eroded because I don't think three years from now decagon will be at a hundred and new coal will start taking the debt stuff away I think this is a point in time like Salesforce where you have the chance to grab a 10 or 15 year market slot it's not that I don't think you can get them a momentum today what I worry is just that when there's so much competition I think everyone's going to be less durable it's not your 10 year old SaaS company that is seeing less durability I think this is new this less durable revenue and I don't see any reason why the new guys if you listen to Varun at Windsor if he's like our only mode is working harder than everybody else in speed he's not claiming he's building any mode this product didn't even exist 90 days ago you and saki I do think in enterprises the truth is once you're installed it's hard to take out for exactly the reasons you said the shit doesn't work so well unless it's trained and tuned you just have a bias to be there and then the other thing is once you have the perceived leader you do have all that kind of positive reference value I mean I don't think Salesforce was winning in 2010 because it was the best theorem it was winning because it was the default option yeah but I just worry that with so much great competition it's not just that your revenue is going to go to zero I just worry there's going to be more churn more downgrades and harder to win deals like those benefits to hitting scale I think are less than they used to be even if the budgets are exciting and I just I don't know how to predict where the future of anyone will be there's going to be so many shiny pennies in AI and so much change that like these chat apps are great but when chat voice bots like you know it's just starting right now it's just starting is having real digital people join support not dumb cartoons are bombarded with the audio that doesn't match the video I'm talking about people better than a human joining it now maybe that's not Sierra or Decacon or Intercom or Gorgias or Zendesk it may it may come from another place and then these spaces it's not once a decade disruption runs every five years now it's literally every five week disruption so this lack of stability is where I think that the Decagon revenue growth justifies hundred X it's the stability that I worry about if it's stable I'm all in if one to fifteen and twelve months I'm all in that is fair in the sense that you have to significantly more variance and product market fit in these AI products than you saw in SAS I would still assert that enterprise grade big installs with lots of integration will be way stickier than most it also be slower to build than most but yes I think across the board in AI how are you looking pain say it well I'm just saying AI is the greatest fran for verticalization which is like we led the series a for company called Solve it's AI for patent lawyers if you think patent lawyers are switching software tools often you are high it's a once every ten years which difficult thing to do there is no way the churn is what it is with horizontal developer audiences like it would be with curcordium and I agree but I think there's a bit of VC old school hubris here which is that it's killed versus maimed I think once you're embedded in a workflow once your core once your core it could be an SMB it could be mid market when your core it's hard to rip out okay it takes time but what happening with AI is people are looking more often and deals are more competitive and there's more pressure on pricing at downgrades anyone that says there's not when some new AI competitor comes in and says we will do this at half the price and it's ten times better even if folks take a look everyone thinks their sales team is so great at resisting pricing pressures you know what happens when they cancel they'll do the deal for half price it's just these we're missing the fact that AI can maim leaders even if doesn't kill them and that can take them off the IPO track that can destroy venture investing instead of 50% at 500 million you're growing 30% at 300 million because you got maimed you didn't die but man you know longer can IPO that's terrible and that's what's that's where people that are hiding their ostriches in the dirt I think their their startups are going to fail because they're they're not realizing they're getting these knife these knife cuts I think it's more the ostriches are hiding rather than people hiding their ostriches but I didn't get the metaphor that deck of gone 15 million came from somewhere it might have come from intercom it might have come from Zendesk and if it and they notice right you'll notice I hear your point I do agree that yeah the board competition and churn are significantly greater now because like I said I think the world is in flux it was locked in for 15 years in sass land it's been in flux for the last two years and for the next two or three years in enterprise land but and this is where I could be wrong but I'm just going to put it out there I think that what a successful center products at AI starts to gel over the next couple of years and the people who are in the lead at that point in time get a similar 10 year run the 10 year runs you and I bought benefit from in sass Jason and that risk of churn and that 60 people shakes out to three or four and in the end market formation evolves in the same way as it did in the enterprise space which is you know typically any enterprise apps market place tends to be a modest dollar gopally of three to four players where you know you have steady market share that's the vision if if you're wrong in that vision then these assets are worth 10 times revenues the only what five times and everyone is so hard to be wrong my head hurts I least think it's much riskier than I thought a hundred days ago much riskier not being binary I'm saying it's much riskier that there isn't this stable state at the 14th electron or whatever it is like that the stable state no longer exists I don't believe it exists anymore I hear you and and you know I will say I'm on I'm lucky enough to be on one board with an executive I won't name him but he's very senior technologist and one of the model companies and really understands and I just shut up and listen to that and really you would say really do I shut up but I just shut up and listen to him talk what he talks about you know model trajectory and his common over and over again is you just have to internalize what the models are going to do in the next two or three years and you might be able to do that because it's going to be done for you so that is the argument free on your side Jason which is that the more the model can do the more of that software stack gets sucked in so I do agree it's a countervailing force I don't have clarity on it but until you get a handle on that you're right you are at the risk of more disruption than we've seen in you know the past 15 years I just I just think we should be honest portfolio companies founders if they're seen a little bit of elevation insurance more pricing pressure on renewal decagon in a couple of deals whatever it is okay they should see this is a canary in a coal mine their zero should not come to the board meeting and say it's just a little yeah we lost a couple we're seeing a little pressure on downgrades like this is not a bump this exponential change in terms of risk and I just think of nothing else maybe VCs will take the risk but founders should jump on this like when you see a little bit of the start you better you better be all over it because I'm literally talking with Yamani Rangan from HubSpot last week this is HubSpot she said now at HubSpot with cursor they are pushing out so many features they can't put them into production anymore she wasn't kidding they're they're said they're 50% more productive at HubSpots a big F and deal okay the fact that HubSpot now is develop more features than they can push out think about that when you think you have a stable state in your 50 person startup or that you can rest at 50 million ARR HubSpot has more features than they can put into production for the first time ever and she's not to our mesh but I'm sure it's a hundred percent accurate I mean she's looking at her and she's measuring this by code commits it's too much business process change you know it's just that stability HubSpot was so stable for years oh well add CRM at 100 I mean where are you guys invested it was you know a generation of it I'll add CRM at 100 and I'll add service at 300 and I'll just I'll just keep layering this beast and I'll drive NRR from 85 to 100 to 100 and it was just this this check the box but if they can build more software than they can push out what about everybody else can I just touch on one final element before we were you mentioned like main not killed there and we've said about the companies that maybe derailed in going to IPO oh no the public company now for sale the reverse of what we're talking about is struggling to get companies out a company that needs to sell how did we think about and analyze this one I think I'd rather be seven rooms which Dordeshe just bought for 1