Inside the playbook behind the podcast turned into a $400,000,000 venture fund - Harry Stebbings

30:55My first guest on the show was Guy Kawasaki. He was Steve Jobs' roommate. He was a very well-known individual. I was 18 cold emailing from a bedroom in London with no prior relationship to NABC. I found his email in the source code of his website. I did the work. I read three of his books. This was before ChatGPT and you could just ask questions. I read three of his books. I nerded out on his content. And then I sent him an email and it was four lines. It said, hi, guy, keeping short out of respect for your time. Again, no, I hope you're well. No one gives a shit that you're well or this rubbish plasties at the beginning.

31:31Hi, guy, keeping short out of respect for your time. I've read all your books. In X book, page 284, you said, X, I would love to discuss this with you on my podcast. I know you've got a book tour coming. Could we align it? Let me know. Harry. Super clear ask. very clear that I've done the work ahead of time, zero fluff. If you want a bonus point, put a PS at the bottom and then find something humorous, esoteric about that guest that many people don't know. And so I emailed Mark Benioff, the founder of Salesforce, 53 times before he agreed to come on the show. And every single time I did a different PS at the bottom, whether it was about his holiday home and the weather there, or ultimately whether it was about the type of whiskey that he liked the most and which vintage year it was and that people want to buy from people showing that extra work really can move the needle in convincing someone yeah that's no i 100 % agree did you feel talking about mark benioff do you feel like um when a company is public because for me like i've watched the episode of uh of mark benioff on on 20vc do you feel like when a company is public the way the ceo is speaking is like kind of boring like no offense but uh um it depends um i know i mean redo that it doesn't depend yes they do get more boring and they have to it's it's really challenging because you are from a compliance perspective forced to be more boring on a lot of cases you can't talk about a lot of things your share price will literally tank billions of dollars.

33:15If Mark said something about the future of coding, or the future of sales, or the future of agents in sales, it could literally wipe billions off the market cap. And so you just really do have to be careful. And so I feel really sorry for them in that way. The other thing that's very hard about content today is clips. You can clip content and isolate it on social and it can be very viral and although it's true it can be taken out of context and almost it's a really interesting thing that i think a lot about today which is long form is just a capture mechanism for short form which is we record this and we record for whatever an hour 75 minutes whatever but actually this is purely a net to get the gold nugget which is the 35 seconds of me talking about a specific thing and that's what goes viral and that's what this episode is all about that's the title that's what this is remembered for and more and more long form is just a capture mechanism for short form i see your point do you feel that um because the way i see it also is that you have kind of like different type of audience you have an audience like that is pretty much everyone on the on the planet like scrolling on Instagram, TikTok, YouTube short or whatever and then you have the kind of audience that like to also spend time and dig deeper on like long-form content because typically I watch like pretty much like all 20 VC episodes usually when I have lunch or whatever like dinner or when you know like I do something like and I enjoy it I feel part of the conversation and for me I don't really watch like the the short form but sometimes I would see the short form of maybe an episode I haven't watched that's like from a long time ago and I'm like oh I'm gonna google it and then go to the long form 100 % like short form is also an advert for the long form you know now when I look at our short form our short form drives 62 % of net new subscribers and so if you don't do short form you are massively missing out.

35:24This is another thing though that people don't understand. It's like we've seen the professionalization of content. We have teams and teams of people who create, I think we create at least 100 clips a week. How big is the team that manage all of that? 21. And so it's quite big. And this is why venture funds who want to compete with us, like one, you need a big and a great team. And number two, it's very difficult to put a media team on top of a venture team it's much easier to put a small venture team on top of a bigger media company and that's a very different thing you know for the biggest funds in the world to hire 21 year old short form tiktok experts they don't they don't know what they look like my friend i promise you they do not know how to set case studies tests um trials for 21 year olds doing instagram reels um so it's very very different um but absolutely short form is key i want to go back to uh to what you said about like uh the public ceo like when when their company goes public obviously like uh you have a lot on your shoulder like if you say something poorly it can be misinterpreted it can really like tank the stock and you can potentially like lose billions etc like right now like I want to run something by you my feeling is that public company especially in the software world they managed to to be public because they were like best in class you know like they reached certain level of revenue that most companies will never reach at a certain retention with a certain growth rate etc and that's when they IPO'd however when you look at public multiples even though these companies are supposed to be the best in class they are like way i mean the multiple for the valuation is so low compared to what you get on private market so my question to you is with all the pain that you're getting from being a public companies with quarterly reporting being public making sure that you you carefully say the things online etc etc do you think it's still worth it today to be public when we actually see the amount of secondaries and the amount of liquidity that you can make as a private company categorically not very simple um traditionally uh the cost of capital in public markets was uh you know cheaper than in in private markets and now that has shifted as you said it is an incredibly scrupulous and difficult pricing environment for public markets and the multiples are very low um you know you see that when you look at a wix which is valued at less than a lovable or a replet in in certain cases and lovable and replet are amazing businesses that you know we should be so proud of but wix is a very good business as well um and it does you know two billion in revenue so unwaveringly yes but there's a caveat to that which is you have to have capital supply and so if your stripe or your Databricks or your OpenAI or your any of these guys, 100%, there is no reason to go public.

38:28You have infinite capital supply and your stock is tradable in real time. Everyone always wants to buy it and there is real time transaction value to your stock. But if you are a mid-tier SaaS company that's two to five billion in enterprise value, there is not infinite demand for your stock in private markets. And there is not real-time trading going on in your stock in secondary markets. I know. I have several of these companies that are 2 to 400 million in ARR and growing 25%. And they're good. But is there a real secondary market for them with people hounding you? No. You have to really know secondary market buyers, traders, family officers.

39:14And so unless you are a small select few, it does still make sense to go public because you need access to the capital and you need access to the trading volume. Makes sense. So your feeling right now is that the best in class company potentially will not go public in the coming years? No, they won't go public in the coming years. I do not think a Stripe will go public in the next few years. They have the capital supply. There is the secondary transactions that take place and satiate the appetite to sell, both for buyers and sellers. I do not see why they would go public in the next few years.

39:53On the flip side, I think OpenAI will go public in the next few years. I think they'll go public in Q1 27. And I think they will for a different reason, which is OpenAI is one of the biggest and most important consumer brands in the world. And for them, opening the ability and the access for the world to own a piece of OpenAI could provide such a pricing premium that it could turn them into a multi-trillion dollar company in a way that it would outweigh the price of the private markets in that way. And so that's the one caveat I would have there. Yeah, I agree. And I think for OpenAI, there is also like a kind of an interesting challenge for them because they really like came up as the AI company ruling the world and it was only them for quite some time but now we're seeing like more other like either you have like the Chinese with DeepSeq you have the French with Mistral but I mean for me they're still like not the real competitors like the biggest competitor is Google and when you look at what they've done in the last year they have created their own chip like they're gonna release like a new and much faster chip like they've done like so many things that i feel like uh open air needs to really build within consumers such strong habits that people will not want to switch to google when it catch up product market fit cannot be underestimated and the weight of consumer brand cannot be underestimated and generally when you think a consumer brand is hitting an inflection it's really hitting its peak that's when it's just starting when you look at revolute today a lot of people in the tech scene are like oh wow it's like it's hitting it's a lot no no it is just starting the terminals in airports the vending machines revolute has 5x to go from here easily in consumer adoption when it's reaching its peak in our tech minds it's just entering the minds of everyone else that's really important number and i think for revolut also what's something really interesting is um so we have like um i wouldn't say it's a it's a real competitor but uh conto is like the french unicorn you know who's doing banking and they're starting doing like b2b while revolut was like b2c but now revolut is moving uh towards like businesses and uh and we made like uh actually the switch because the fact that they they started you know like serving uh b2c they were obviously in like many more regions dealing with many different currencies.

42:26So whenever you go to enterprise like ourselves, you know, we're like having tens of millions of dollars in revenue in dollar, millions and millions of revenue in pound, tens of millions of revenue in euro, like you need to leverage that currency. And I think Revolut like did something pretty amazing because for us, it was impossible not to go with Revolut, like making that switch, even though as a company it's a bit annoying to change like a bank etc making that switch was basically like uh i don't know two or three hundred k like uh revenue save saving you know like within a year so it's uh it's quite insane and i think like as you mentioned in in b2c it's gonna be insane but i think in b2b it can be even more impressive for them i totally agree with you this episode was brought to you by revolute um if you'd like to find out more um we're not even unsponsored i should ask for a sponsorship maybe we'll see i i have interviewed a thousand founders in the last 10 years nick steronski is the most impressive founder that i've ever interviewed period for two reasons i wasn't i was on your show i feel bad now dude i'm gonna be honest if you were as good as nick like i would be pretty chuffed um well one how he manages people and his gradings on people and bluntly the different buckets that they sit in in terms of the quality within the organization.

43:51Incredible clarity, incredible understanding of how people are growing and developing in real time. Very impressive. And most importantly, number two, testing new bets. The single best founders are able to move from one chapter of a company to a second chapter. You know, Steve Ballmer said this before, it's very difficult to get product market fit really truly once. To be able to do it twice is next to impossible. truly great founders are able to make the transition from one tide shift product market fit moment to another nick steronski runs 26 products at the same time in a testing lab within revolute right now he monitors them on a month-by-month basis and then gives them more money when it's working and takes money away when it's not working it has led to some of their greatest breakthroughs in everything from their introduction of b2b banking to crypto trading to stock trading to their e-sim product to their lounge giveaways in airports all products of this incubation lab if the biggest indicator of a successful founder is the ability to move to the next chapter nick is so far ahead yeah that's that's really true and it's uh it's really impressive to see how quickly he moves.

45:09The only person actually I met who I feel has and it's one of the episodes, it's Thibaut Elziach. I don't know if you've met him already, but he's an ambassador in 20VC. Ah, okay, okay, awesome. So you know him, sold this company to Adobe for 800 million, then built 30 plus companies for our unicorns. And it's quite fascinating to see these people who are like, they have like so many ideas and they really surround themselves with such a great team that they can iterate so fast and launch many things in parallel and eventually get some really bets that are working well. 100%, very similar. Thibaut is fantastic.

45:50And I want to follow up on the private versus public because it's also linked to your strategy. As a fund, eventually down the line, you know you you need to to give a return to your lps that's the goal if companies like don't go public anymore what's your strategy to liquidity as an early stage fund like how do you see this i think in the last 10 years venture has either been a really good time to buy or a really good time to sell it is very rare that it is a good time to be both a buyer and a seller right now it is a very good time to be a buyer and a seller. And if you want to look back at venture capital data on returns, venture capital is a terrible asset class.

46:36Terrible. Unless you take advantage of very small time windows where liquidity is plentiful and available. And if you take advantage of those, it is one of the best asset classes available to us. My job is to try and understand when those small windows are and to take advantage of it as much as possible. Now is that time. We have taken advantage of it with some positions and returned tens and tens of millions of dollars in the last month alone. And LPs are grateful when you send the money back. And a lot more managers need to be proactively managing their book, their investments, and have a liquidity strategy.

47:23It is not acceptable, and LPs, investors, and funds listening, it is not acceptable for your managers to just say, hold on to your winners. You have to be planning liquidity, and actually you have to be aware of exuberant pricing. We sold one company recently where it was a great company, but the price we were offered was a five-year price away. Would I rather have that cash now and have the chance to redeploy it in more bluntly higher yielding assets than holding for five years for the price that i'll get today of course and so you have to take that into account and be very realistic about it and that's where you know it's really nice we have healthcare foundations as the primary stool of our lp base when we make money we make money for people who have cancer treatment that needs paying for for kids that have you know challenging health conditions.

48:17That's pretty great. And, you know, people worry about selling because it's like, how am I going to say to the founders, oh, I'm selling? I say my job is to make money for my investors. And it's of course to support you too. But you should go home, Guillaume, every night being really proud of yourself because you've just paid for a load of children to have treatment for this disease from our ability to sell. And I'm grateful to you. And you should be really proud of yourself and your team because you'll pay for a load of children's treatment and that's awesome and i think that's a fantastic thing and can you explain like your reasoning behind like uh we are in a window where it's a great time to buy and also a great time to sell can you like elaborate a little bit on on that part yeah so when it's a great time to only sell it means there's exuberant pricing there's far too much money but there's no real technological innovation A great example of this would be 2021 when we were all sitting in our rooms, bored shitless, thinking that COVID or remote was an ongoing technological trend or breakthrough that was going to create a next generation of enterprise value.

49:25It wasn't. Same with NFTs. And so that was just a great time to sell. A great time to buy a loan is when it's like fucking winter and there's no money around and prices are in the basement. basement basement basement and even better if there's also a technology innovation on top of that be it sas be it cloud be it uh ai you name your technology mobile whatever that is now is a phenomenal time to buy and sell because we have technology innovation i think like we've never had before for at least 20 to 30 years on top of that you have plentiful capital supply and so on the buy side it's a great time because of technological innovation meaning there are a huge amount of new technologies, products and services that we can create for the first time, which make for great companies.

50:14And then two, on the supply side of cash, there is so much cash coming in for it that prices are reaching exuberant levels where it is better to take money in some situations off the table. And you need to be very cognizant of that. The big question for AI, that people aren't spending enough time on, is will we see the transition in spend from human labor budgets to technology? Will we see people replacing humans with technology? As awful as that sounds. If we do, software budgets and our business expands insanely to trillions and trillions of dollars. If Claude Code is able to replace a huge amount of devs and make devs X amount more efficient, they open up a GDP of dev labor that is so much larger than dev tooling.

51:10That is where this business works. AI will not produce the returns we think it will if we do not see the transition in spend from human labor to technology, because then the time stays the same and we've just paid higher entry prices for the same market size. I understand your points. Maybe to challenge it or bring another perspective, don't you think that the biggest opportunity for AI is not only replacing labor, but opening new markets? So typically right now, you take the example of dev tools. Like let's say you spend 200K on a developer like in the US per year. What you're saying is like, if I can replace a dev, this 200K opens up a market for software that they can spend with me.

52:04My thinking is like, we're going to see also a new market for all the tasks that no human could actually do because it was not cost effective. So let's take a specific example. If you go in legal tech, typically some lawyers, they will not want to go after like some specific deals if it's less than 100K. Because in terms of cost of labor, it's way too high. Whether with AI, we're going to be able to do all the same tasks at a much cheaper cost. And therefore, you know, it will open up basically new markets. So what do you think? Like, do you think the biggest opportunity in new markets that we don't know or in really existing market and replacing like labor forces?

52:48I think companies are one of two things. I think they are one, a category creator, which is exactly that you said. They open up a new market that previously did not exist or was not serviceable. Or number two, they are a category disruptor. You challenge Salesforce with a new agentic approach to sales and CRM, whatever that is. I think the opportunities are plentiful in both. So I don't think one is like more interesting than another. I do think it's important as a founder to identify which one you are in and how you think about approaching that. And I very much do when I meet companies today, I go, okay, this is a disruption play or okay, this is a category creation play.

53:27I absolutely do think like that, but I completely agree with you. There is a huge opportunity in that, but I think it's one of either and i i want to jump back on uh because you're talking about like the the different type of companies so i'm also interested in understanding whenever you invest in companies do we invest only um in european companies or also in the in u.s companies um or global companies a hundred percent we invest in u.s companies uh we don't invest in global companies very important rule um you know i have made the mistake of investing in emerging markets before uh everyone made a mistake in 2021 and the honest truth is guillem of course you can make money in emerging markets and of course there are good companies there but you have an opportunity cost of your cash and you can deploy it where it is going to yield the best returns in maybe the highest likelihood building a business is really really hard you know this better than anyone it's really hard.

54:29If I layer on top political risk, currency risk, weather risk, infrastructure risk, it just makes it so much harder. What if I devalue your currency, Guillaume, and suddenly all of your revenue overnight becomes half as worth, half as valuable? Oh my God, through no fault of your own, your business has just lost half of its revenue. There is, for me, unnecessary risk in emerging markets. And, you know, candidly, if you are going to take that risk, you need to be paid for it and paid for it really well. And so for us, it's very simple. We do Europe and the US and we are pretty disciplined in our swim lane there.

55:07You know, especially for early fund managers, really important to understand this. You need to stick to your bullseye. You have told investors that you will do something. Stick to what you said. You get infinite amount of credit for doing what you said you would do to people it's very much the same in your personal life when you show up at 7 p.m as you said you would you get credit for what you said you would do and i think that's really important we have exceptions but it's really important that you don't let exceptions become the norm i agree and i think like in your line of work everything is based on trust so you know like following up on a promise and doing what you said you would do is is definitely like the greatest currency.

55:50We lost money in a deal for a specific investor. And I was very worried that they wouldn't want to invest with me in the future. And as the company was going bust, going to zero, every single day I phoned them and I gave them an update for three weeks. I got ahead of it, well ahead of it. So it was very important. There can never be surprises. You have to give real-time continuous updates and you have to be humble. This is my fault. I should have seen this. It is on me and I do not take this lightly. I accept full responsibility and I want to do everything I can to make this as informed and real-time a process as possible with you.

56:29At the end of that process, they said, we are more likely to invest more money with you next time. The way that you approach this with the humility and the responsibility that you did makes us want to work with you more. That shocked me. The way that you handle moments of crisis and tension will dictate so much about your personality and character. It reminds me of a study that they've done where basically like customers who encounter a bug on the software and where the support team actually solves the bug are like two or three times less likely to churn the software than if they hadn't encountered any bugs.

57:10Totally. A hundred percent. You know, how you leave a job is very important because it's how you're remembered. And again, like, you know, I started a fund before 20VC with a brilliant investor called Fred. And when I left that fund, I was very young. And I hope he doesn't mind me saying this because I haven't ever said it before. And I love him dearly. He's brilliant. But when I left, I was very young, 21, 22. And I was immature. I said, yeah, I'm leaving and I'm going to start my own thing and I'm going to start it tomorrow. And he was a brilliant partner to me and he was a brilliant man and is a brilliant man.

57:48And I should have been a lot more patient. I should have been a lot more thoughtful. And I regret that. You know, I think the benefit of age is nuance and reflection. And now I would have done that very differently. And I still regret that. You know, I would have said, hey, I'll work on a transition. It'll be a smooth transition. but that's where I think emotional intelligence does come with age and I do slightly worry about this new generation of founders that have said I met a 17 year old the other day he has 12 term sheets for between 5 and 10 million invested into the company he's fantastic I think he's brilliant I really do I'm really excited by him he's 17 Guillaume the emotional intelligence it's just you're too young i look back at myself when i was 17 so i am i don't know the answer but i'm open ruminating what happens when you have 19 year olds who aren't fully developed with this level of pressure responsibility money i'm not sure yeah i think we're gonna have like a lot of new netflix shows in a few in a few years talking about some of these companies you know like we get that crazy valuation, getting a lot of money, especially at a younger age.

59:07And you mentioned you invest in US and Europe. I feel like there's been a very strong like US narrative to kind of like say that Europe is becoming a museum and that the innovation only happened in the US. And I feel like that narrative is partially true in some way. But it's also a narrative that definitely serve the US because if they keep saying, you know, that Europe is shit and that if you are ambitious, you should be in the US, then obviously any ambitious European will want to go to the US, which is pretty helpful for them also. And we've seen this, you know, in many US companies. So what's your take on how Europe can really like make a strong play in this AI race and how different should we be and what are the things that we should do?

59:59I agree. I think Europe's shit and no American investors should come to Europe. They should just leave it alone. Shit. Nothing good. There's nothing good. Wouldn't bother. Wouldn't bother. I think America are making a big mistake right now in terms of their approach and narrative to Europe. The way that you make people aspire to be you is by showing them the way with your brilliance. And Silicon Valley for many years focused on being brilliant and showed the way to build great companies and Europe and the world watched in awe and wanted to be them. That's a good way to do it. A bad way to do it is to shit on your younger brother.

1:00:38That's not a good way to do it because what I see now is America bullying us, laughing at us, whatever. And what that does, it inspires an aggression, a desire to prove someone wrong. And I have Project Europe, which I started with a brilliant person, Kitty, out of Entrepreneur First, where we invest in 18 to 25-year-olds building really hard products in companies in Europe. And so many of them want to prove America wrong. They want to show the US that we can build great companies in Europe. And that is because they started shitting on us. the aggression comes because they want to prove them wrong the chip on the shoulder to the point of broken relationships and so i unwaveringly think that europe can build unbelievable businesses for anyone that thinks they can't i would absolutely say there is one conclusion to that which is you have shit deal flow because and i don't say that agony i meet tens of great entrepreneurs in europe every single week who are between 18 and 25 building incredible businesses If you think that we don't have great entrepreneurs, you simply don't have access.

1:01:49And I think when you look at Matty at Eleven Labs or Torsten at Helsing or the guys at Synthesia, we have incredible companies being built in Europe today. And everyone goes, well, NVIDIA and Apple and look at the market caps. And I go, yeah, absolutely. You're right. And they also started in 1982. too so like give us a bit of time okay um and so i i'm wavering you do i'm incredibly bullish on europe and the other thing that's so important is like you need to have weak competition whatever you do in life guillom choose weak competition and if you want to win in silicon valley you're competing against peter teal mark andreessen the sequoia team peter fenton at benchmark the found the list goes on and on of in europe i can't name five good series a funds can't name them wow that's a very different competitive landscape i'm here to win my chances of winning here are much higher yeah i agree i agree i know we're almost running out of time so i will ask you like one last question what would be like um one advice that you would that would you tell to your younger self you know like before you you actually like got started and made those investments you know that that will lead you know to where it is right now everyone gives the advice I wish I had known that it would all work out I am thrilled that I never knew that it would all work out because every night I went to bed worried nervous scared and it drove me to do everything better, more, harder, put in the extra work.

1:03:36And I still feel incredibly insecure, if I'm honest, like we've achieved 1 % and we are not moving fast enough and we are not doing good enough content and we're not doing good enough variety. The truth about success and being good and being a good founder, as you know, is success and happiness aren't aligned and actually yes we have great success with our content but i see all the flaws and i only see the flaws and i'm glad that i do and so i think the advice that what i know now that i wish i'd known is like it's good to be uncomfortable with where you're at because it will drive you to be better and better and don't ever feel comfortable being comfortable is one of the most dangerous things that you can be you should always be uncomfortable and you should seek discomfort that's what i wish love it what's the best way for people who've uh listened to the podcast to uh follow you or uh reach out to you uh twitter harry stebbings super easy love twitter love to see you there awesome thanks a lot harry awesome dude thanks