20VC: Chime IPO: The Breakdown | Why Fund Returners Are Not Enough & Seed is for Suckers | Are IPOs Dead & The Future of the Late Stage Private Market | Rippling vs. Deel Lawsuit: WTF Happens Now?

Unknown Source May 22, 2025 78 min

artificial-intelligence investment startup generative-ai anthropic openai google

🎧 Listen to Original

56 Companies

99 Key Quotes

4 Topics

5 Insights

🎯 Summary

20VC Podcast Episode Summary: Chime IPO, Late-Stage Dynamics, and Market Realities

This 77-minute episode of the 20VC podcast, featuring Harry Stebbrings, Rory O’Driscoll, and Jason Lemkin, provided a deep dive into the implications of the Chime S-1 filing, the evolving dynamics of late-stage venture capital, and the current state of the IPO market.

1. Focus Area

The discussion centered on General Tech and Venture Capital Dynamics, specifically analyzing the impending Chime IPO, the strategic implications of late-stage valuation step-downs (ratchets), the comparison between high-growth “sex appeal” companies (like Stripe/OpenAI) versus capital-intensive businesses (like Klarna/Chime), and a brief but intense segment on the Rippling vs. Deel lawsuit.

2. Key Technical Insights

Durbin Amendment Arbitrage: Chime’s favorable economics (making ~$250 per customer annually) are significantly underpinned by the Durbin Amendment, which allows smaller banks (under $10B in assets) to charge higher debit card interchange fees (approx. 1.2%) compared to large banks (approx. 50 basis points). Chime partners with these smaller banks, creating a regulatory moat that larger incumbents like JP Morgan cannot easily replicate.
Late-Stage Protection Mechanisms: The conversation detailed the importance of mandatory conversion terms (the IPO equivalent of liquidation preference) in late-stage funding rounds. These terms protect investors from overpaying by adjusting their share count downward if the IPO price is significantly below the last private valuation (e.g., the $25B Chime round potentially pricing at $10B).

3. Market/Investment Angle

IPO Market Receptivity: The panelists noted the surprisingly fast bounce-back in the public markets following the March volatility, suggesting that companies like Chime, with strong fundamentals ($1.7B trailing revenue, 30%+ growth), are smart to proceed with IPOs now while the window is open.
Fund Returners Are Not Enough: A strong contrarian view was expressed that merely returning a fund is insufficient for top-tier VCs; the goal must be outsized returns, highlighting the “white heat” need for high-growth assets.
IRR vs. Capital Loss Risk: Late-stage investors (like those in the Chime round) are primarily concerned with IRR risk (time to liquidity) rather than outright capital loss, especially when strong downside protections (ratchets) are in place. Early-stage investors, conversely, face a much higher risk of total capital loss.

4. Notable Companies/People

Chime: The central case study, noted for its high user adoption (two-thirds use it as a primary account) and its reliance on the Durbin Amendment structure.
Sequoia Capital Global Equities (SCGE): Mentioned in the context of their $25B investment in Chime and the subsequent need to understand their protective terms (ratchets) in the lower-priced IPO.
Stripe, Databricks, Anthropic, OpenAI: Cited as examples of companies with such high “sex appeal” and private capital access that they have little incentive to IPO, contrasting them with capital-intensive firms.
Klarna: Used as an example of a financial services/lender company that should likely go public sooner due to its need for continuous, diverse capital access, especially given decelerating growth.
Rippling vs. Deel: Briefly mentioned in the context of a serious legal dispute involving allegations of “theft of trade properties,” leading to the immediate strategic advice that the CEO should prioritize settling quickly to mitigate catastrophic risk.

5. Regulatory/Policy Discussion

The primary regulatory discussion revolved around the Durbin Amendment, which creates an uneven playing field for debit card interchange fees based on bank asset size. The panelists noted that this legislation is a key factor in Chime’s business model and a source of frustration for large banks.

6. Future Implications

The conversation suggests a bifurcation in the late-stage market:

“Sex Appeal” Companies: Will continue to stay private indefinitely as long as private capital remains cheap and abundant.
Capital-Intensive/Lender Companies (like Chime/Klarna): Will be incentivized to IPO when the window opens to secure continuous, public market access to capital, even if it means accepting a valuation step-down from peak private rounds. The overall trend suggests more companies in the $1B+ revenue tier will now seriously investigate going public.

7. Target Audience

This episode is most valuable for Venture Capital Professionals (GPs and LPs), FinTech Executives, Late-Stage Founders, and Investment Bankers interested in IPO strategy, private market valuation mechanics, and regulatory arbitrage in financial services.

🏢 Companies Mentioned

Icon ✅ Crypto Investment Firm (VC)

Tiger ✅ Crypto Investment Firm (VC)

SoftBank ✅ Crypto Investment Firm (VC)

Sequoia Capital ✅ Crypto Investment Firm (VC)

Peter Gassner ✅ unknown

Mary Meeker ✅ unknown

General Catalyst ✅ unknown

Google CFO ✅ unknown

If Google ✅ unknown

Carbled Streets ✅ unknown

If I ✅ unknown

Tom Raven ✅ unknown

Orlando Bravo ✅ unknown

Tom Bravo ✅ unknown

Demo Day ✅ unknown

💬 Key Insights

"I didn't allow one single session to talk about the past. It was banned. The past was banned. You were only allowed to talk about AI, and you were allowed to talk about AI today and tomorrow, and that was it."

Impact Score: 10

"The lawyer that you engage will tell you you've got a great case when you start out. As you get closer to the courtroom door... they start changing the tune slightly... the day before court they'll be saying, "Remember, I told you it was a 50-50 bet.""

Impact Score: 10

"To all founders out there, settle everything, especially when you're not in the wrong. When you're not in the wrong, settle it, right? Because it's so hard if you're not in the wrong to settle it, right? It's so wrong. That's the number one reason to settle it."

Impact Score: 10

"Will OpenAI stop being a non-profit? Yes or no? ... At some point, this company's gonna get public, it's gonna have a PBC type structure. It will get there."

Impact Score: 10

"The incentive, and this is where I go back to my monomaniacal theme of the death of IPOs is just bad news all around for capital allocation, because now as a GP, you're sitting there going, "I want to hold this thing forever." My LP would probably like to get some liquidity."

Impact Score: 10

"If there's not four exits above $65 billion in the next five or seven years, then the people who bought Stripe, SpaceX, Databricks, OpenAI, and Anthropic are screwed."

Impact Score: 10

📊 Topics

#artificialintelligence 114 #investment 47 #startup 33 #generativeai 3

🧠 Key Takeaways

💡 talk a little bit about the valuation, which will segue us perfectly to talking about how other people should respond here

💡 consider as 10 years out of the exit size

💡 all be so lucky to have cap gains