E207: Can AI Replace Your VC Analyst?

0:00You recently vibe-coded an AI VC tool. We used AI, my girlfriend and I, to build this tool that allows you to upload a PDF. The DI will do deep analysis, competitive research, web crawling, and generate an investment memo. And you can also upload a forecast and Excel model, and it can do all the situational analysis, planning, forecasting, and generate a term sheet automatically. It's incredible how someone with no engineering experience, never taken a CS class, doesn't know what a terminal is, doesn't know what an HTML is, is able to build this tool entirely end-to-end, front-end, back-end, chat interface, web search analysis, API calls, GitHub, GitHub Actions, Rysel deployed, end-to-end deployed, all within a weekend.

0:44And what's the use case that you're building around? Is it to completely replace VC analyst? You get way more detailed analysis, the market, market, competitive trends, analysis, you get forecasts built in. So it just reduces the process and human biases to make it a sort of much more transparent, fair and efficient process. Because going back again to first principles, now with AI, if you can be a lean team, grow, hit your forecast and be profitable or not die, then I want to fund you on my support. You founded super.com and you just had a milestone. Tell me about where super.com is today. I started that company in 2016, grew from zero to 200, 250 employees, over 200 million annual revenue and profitable and over 50 million users.

1:28You also run a cool leaderboard. It's called Lean AI Leaderboard. Tell me more about this Lean AI movement. After I run the company for eight, nine years, after a point where we're hundreds of millions of revenue, profitable, growing, I decided to step back to the board and give other leaders a chance to shine and take the company forward. So since transitioning to the board at the end of last year, I've been spending a lot of time helping founders, doing angel investing, sharing content, dabbling in AI. And it's been a great journey. And in that process, beginning of this year, 2025, I saw a lot of people tweet on Twitter and LinkedIn about how these companies with so few people are getting to$10,$20,$50 million in AR and beyond.

2:08And I thought there must be more than just these handful of companies like Cursor, Midjourney, et cetera. So I decided to create this leaderboard to track all the super lean, hyper growth companies that post AI that are growing extremely quickly with very small teams in an official place called Lean AI Leaderboard. So I built this leaderboard, launched it, and it just took off, had millions of impressions across social and the website. And now it's this sort of way to track these lean AI companies growing extremely quickly with very few people and high revenue and oftentimes profitably. So it's incredible to see this new trend.

2:44Double click on why AI is allowing these crazy high growth companies that are grown on a very lean basis. Is there also a revenue and a cost side to the equation or is it just simply less engineers? That's a great question. I think there's a couple of reasons why you're seeing this new trend and it's a confluence of factors. One is it's easier than ever to start a company with these AI tools, coding, co-palates, customer service, marketing, et cetera. You're seeing teams, instead of hiring people, they can just automate and augment themselves. So a small, lean, crack team can stay nimble, move quickly, and get a lot more done.

3:23So you're seeing that on the cost side, whereas before you had to raise a lot of money to build your product to go to market. Now these teams can ship quickly and get to market extremely quickly. On the demand side, you're seeing there's also a higher willingness to pay. Everyone is sort of interested in AI, interested in trying AI, adopting AI. They're getting pressure from the board, getting pressure from the markets. So there's a much higher willingness to pay from the customer side. And oftentimes you're seeing higher pricing and higher AOVs because people are pricing based on outcome, not on necessarily software receipts.

3:54And for example, it's much harder to get to 10 million AR if you're selling a SaaS seed for$5,$10 a month. But if you're selling an outcome, you can sell the same thing for hundreds or thousands of dollars. So higher OV, higher demand, willingness to pay, and lower cost basis. And you're seeing this effect of the AI company scaling so quickly and oftentimes profitably. Give me an example of one or two outcomes that AI companies are pricing based on versus kind of this traditional SaaS model. So a good example is, I think, a company called GrowthX. So that's a sort of AI animal service company, but it's incredible because they have 70 % margins and it's AI power growth.

4:34They were able to scale from zero to, I believe, 7.2 million AR within a year and a half and 13 people. And that's an example where if you're just selling a SaaS tool for tracking your growth and analytics or something, you couldn't charge that much. and grow up so quickly. But because they're charging based on outcome, they're charging, I believe, five, 10 ,000 or more a month per client, but they're delivering end-to-end outcomes and they're able to do it efficiently and leanly with AI automation across the entire back office and keep 70 % plus margins. Tell me about the ideal capital structure for a very lean AI company.

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6:28And it's gotten worse as the funds have gotten bigger and bigger. And so I believe the stat is megafunds that are over$500 million accounted for 77 % of capital raised in the first half of 2022. And these billion-dollar funds needs to own 15 % of 21 billion-dollar companies to just return 3x. But there were only 22 public companies with a$10 billion-plus market cap. So the question becomes, how do you return these mega funds? Well, these investors have to chase more and more extreme outlier outcomes. But being a unicorn isn't enough. You have to be a decarcoin and beyond. But realistically, most companies are not decarcoins.

7:05So venture capital chasing these extreme outliers and makes it such that everyone is forced to talk these large narratives, hire these massive teams, target these massive competitive teams. And that's just not the right vehicle for most companies and founders. And for the lean AI companies, if you can be five people doing 10, 20 million a year, you're probably better off than most venture backed founders. You have way more control, way less solution, way more possible outcomes. And by the way, these are not lifestyle companies. These are not lifestyle founders who are spending an hour or working an hour a day in Dubai or somewhere, but they're hardworking founders who are driven, who are ambitious, who are motivated, but who recognize that there's a better way to start, build, and fund these companies.

7:52So I've been planning a lot of different ways to try to support these founders, where I think the fundamental premise is, if you can grow and you can hit milestones and you can stay alive, which is very much possible now with AI, you should get funding. And maybe it's not traditional equity, maybe it's rev share, roads, or something else, but it's not equity, it's non-dilutive, it's not a recourse, not loan, and it gives the founder optionality while still giving investors a good return, faster DPIs, and you don't have to wait 10 years for an exit. You can recycle the capital right away. So happy that I'm more into it, but these are some of the things I've been piloting to explore new ways of funding and seed strapping companies.

8:33So you popularized this term called seed strapping. What is seed strapping? So seed trapping is an interesting alternative way of building a single company where you raise a sizable, nice seed round, and then you get to escape velocity from there on. So you no longer need to raise consecutive rounds of funding like pre-seed, seed, A, B, C, D, etc. And there's lots of benefits on why seed trapping, I think, is the ideal model for many lean AI hyper growth scaling companies. And we can go into the differences in terms of revenue, founder dilution, ownership control, founder liquidity, et cetera, et cetera.

9:11But I think there's a lot of benefit now with Lean AI that you can C-strap companies and you're seeing a lot of founders do this. Give me a sense for what kind of companies should be using C-strapping strategy. I think almost all the Lean AI companies should consider that because the good part about C-strapping is you don't need to dip into your own pockets, right? So you can start the company without having to dip into your own savings, but you don't have to constantly dilute yourself and chase investors and be on the VC treadmill. You can own control, grow over time, get more liquidity throughout the process, and maybe even buy out some investors over time early on.

9:47So it's a benefit in many ways. In terms of the companies, I think if you're a lean AI native company, it's a great bet. If you're a consumer PLG, I think that's also you've seen a lot of companies successfully do that. If you're an AI-enabled services company like GrowthX, I mean, you can raise money, but C-strapping is a great way to go. And I would say pretty much most companies, except for maybe certain industries like deep tech or heavy enterprise sales, where the AI sales agents aren't quite good enough yet. But as the capabilities of AI agents get better and better, I think we'll see the appeal of C-strapping for more and more companies.

10:24You recently vibe-coded an AI VC tool. So first of all, what's your definition of Vibe Coding? And then tell me a little bit about this tool. Okay. So basically we use AI, my girlfriend and I, to build this tool that allows you to upload a PDF. The AI will do deep analysis, competitive research, web crawling, and generate an investment memo. And you can also upload a forecast and Excel model. And it can do all the situational analysis, planning, forecasting, and generate a term sheet automatically. So that's sort of what we built. And it's incredible how someone with no engineering experience, never taken a CS class, doesn't know what a terminal is, doesn't know what an HTML is, is able to build this tool entirely end-to-end, front-end, back-end, chat interface, web search analysis, API calls, GitHub, GitHub Actions, Vercel deployed, end-to-end deployed, all within a weekend.

11:18So truly using just claw code and claw. And that's, I think, the best definition of vibe coding. As you can see here, all these interfaces, everything was built just within a weekend and entirely vibe coded. And what's the use case that you're building around? Is it to completely replace VC analysts? As I'm exploring this new way of seed strapping and supporting founders, I'm getting a lot of inbound and requests and companies. and I've always felt that the traditional venture investing, especially in the early stages, was very vibes-based, right? Like, do I think this company is going to check all the boxes and become a tech or coin?

11:54And frankly, how am I supposed to know? And the irony is the investors, they get 1 ,000 pitches, they reject 999 of them. They probably don't even look at half of them and they're all trying to chase the two companies in the area that matter, right? But the irony is that the sum of the revenue of the 999 they rejected is definitely higher than the one you're trying to pick. So my thought is, how do you analyze and approach and systemically analyze at 999 of founders who have been in good and great companies, but in a way that's scalable, automated and unbiased and transparent? And you can do this much more effectively now with AI.

12:27You get way more detailed analysis, the market, market, competitive trends analysis. You get forecast built in. So it just reduces the process and human biases to make it a sort of much more transparent, fair and efficient process. because going back again to first principles, now with AI, if you can be a lean team, grow, hit your forecast and be profitable or not die, then I want to fund you and I want to support you. It reminds me a little bit of Dan Gross, who's obviously a prolific AI investor. He had this project called Pioneer, which tried to find these founders all over the world that maybe didn't fit the Stanford, Harvard, MBA or computer science background, but had built something special.

13:11there's a lot more of these than people think. And the reason more people aren't aware of them is because it becomes reflexive. If they don't get VC funded, you know, they essentially never actualize. Exactly. Right. And there's so much of it is pattern matching and, and sort of trying to predict Decker coin outcomes at the earliest stages. And I'm just not sure that's I mean, maybe it's possible if you're the top sort of 10, 20 firms, but for everyone else, I think it's so hard. There's so much sort of selection and self-selection and versus supporting the 999 founders who collectively that's a ton of revenue.

13:49I think on the leaderboard you see here, obviously a lot of them have raised funding, but a lot of them haven't. And collectively it's, you know, 3.460 billion. Right. And some of the best, highest revenue companies have not raised trends in venture like Telegram. You know, building revenue, not funded mid-journey, 500 million plus, zero dollars in funding, surge AI, a billion dollars, zero funding. And so I think you're seeing a lot of these founders are realizing that's actually a better way to build incredibly massive, successful businesses. Have you ever Googled yourself and found your home address, phone number, or other sensitive information online?

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14:56Trying Incogni is risk-free with their 30-day money-back guarantee. Once again, that's incogni.com slash invest. I-N-C-O-G-N-I dot com slash invest. You can also find the link in the show notes for this episode. Your data belongs to you. Take it back with Incogni. Double click a little bit on the founders of these seat-strapped businesses or these highly scalable, non-VC-backed companies. What are some characteristics that you see behind the founders themselves? I don't know if you've seen the meme of the high IQ and low IQ and mid IQ. A lot of times you see these incredibly successful repeat founders who built businesses before the traditional venture fund away, and they realized there's a better way.

15:39So, for example, I had a founder who reached out to me. His last company was 400 million AR, right? 400 million. He's starting a new company. He's like, hey, hey, Henry, I came across your seed strapping thing, and I'm starting a new company, but I don't want to do a traditional YC safe or equity funding. What other methods are there? Because these founders, they've been through the journey, they've gone through the venture capital grind, and they realize that actually there's better ways to build a company, especially if you're a repeat founder. Or you have sometimes the finance is another side of the end, which is, you know, unfortunately, they're maybe international, didn't go to Harvard, Stanford, didn't check the box, TAM's a little small or something.

16:15Whatever reason, venture isn't the right instrument. They're like, sure, this is a great alternative. And then you have folks in the middle, like the first time YC founder, right? So who are like, hey, this sounds interesting. This is cool. It's non-dilutive. It's, there's no recourse, but I don't know. It's different. And I should just do a safe because Gary Tan told me to do a safe, right? So you're kind of seeing this distribution, but my hope is over time, as you highlight more of these stories, these incredible founders building incredible business and outcomes that more people are going to shift to the right of the tail and realize that there's better ways.

16:46And it's not just a single way to play the game. If you had to guess, would you see YC starting to play in this realm? Or would you see kind of a new AI native incubator that's focused on these seat strapping strategy? That's a good question. I don't know if traditional YC will get into this sort of realm because their whole model is based on marking up and fundraising and sort of prepping the companies for a demo day and getting marked higher valuations and fundraising and traditional venture route. and actually very good at it because if you're an incumbent and you're the best at that type of model you know why should you change it's been very profitable for them and they're great and in fact it's been awesome whereas here i think it's a bit of like innovators dilemma or alternative model where at first it looks different it's maybe you know sort of people don't get it but over time as ai and the capabilities become better and better i think you're going to see more and more founders opt into this new model i know i'm not sure if it's an incubator accelerator or funding model or something else my hope is that there will be more people who are doing this so it's not just me who's thinking about investing in different ways but there we can inspire other investors to think about funding the you know 999 companies who are not the two a year that become Deckercoins and hopefully that can translate to more founder more diverse founders more transparent funding and more much more fair efficient process so that's how my hope is more people can do this and and sort of realize that it's also a great economic opportunity as well, because if you can get DPIs right away, right, your IR is extremely high.

18:21You don't need to wait 10 years for an exit or a liquidity event. You can get DPIs right away, and then you can recycle that capital to invest in more and more companies. So double click on the seat strapping model on the investor side. So clearly this is a great model for a founder that's looking to maybe own 97, 98%, the founding team of a startup. Tell me about the dollars and cents of investing on the investor side? I've obviously tested various experimented different mechanisms and models of this. And so the latest thinking and iteration is basically it's a non-dilutive, non-recourse capital.

19:00So it's not equity, there's no control, there's no debt. And all founders can do is they give me a deck of the company, which I use my AI VC analysis tool to do a deep research on, generates that landscape market mapping memo. and then a 15 month forecast. And what I would offer is based on the forecast, basically the idea is like, if you can hit your forecast, which you said, by the way, right? The founder chooses, if you can hit your forecast and generate growth and not die, then I want to give you the opportunity to get funded. So for example, so right now it's structured as a bit of a, sort of a line of credit, which is, it's not debt, but it's up to the founder how much they want to draw.

19:37So let's just use round numbers. I suppose I do analysis on the forecast and I say, hey, you know, I want to give you a million dollars that you can draw in over four tranches. And it's 250K per quarter based on hitting your quarterly forecast. So again, right, the founder sets the forecast. And so long as you can hit it, you can unlock more tranches of capital. But it's up to the founder how much they want to draw, if any. So it's up to them if you want to draw all million or maybe only 250K or half of it. It's up to them. And that actually encourages founders to be more disciplined about capital.

20:10and the structure is around 5 to 10 percent revenue and it's capped over two to five years at two to three x right so it's not cheap like a bank loan but it's way faster and it's way cheaper than equity especially you know pre-seed funding which is you're giving up 20 percent of company for oftentimes a million dollars right so it's capped for the investor but it's high dpi right away and it's an option for the founder depending on if they want to use it and because sometimes what you see is you see founders say oh look i raised a massive seed round you know five million dollars and i didn't even have to touch any of it right even though and they're they're flexing about it but it's actually that's actually kind of dumb because you just diluted yourself 20 plus percent and you didn't need the money so why did you do that so the thing here is help encourage founders to be disciplined with the funding give investors a way to invest in these companies whether they become a unicorn or not doesn't really matter if you can hit targets grow and build a great business i want to fund you and it's a it's essentially a free option for the founder.

21:07There's no cost. If you don't want to use it, great. If you want to use it, that's awesome too. But my hope is that by giving founders a fair, transparent way to get capital as they hit their targets, it encourages great financial discipline, encourages people to actually set realistic targets. And whether you use my money or not is somewhat irrelevant because I would have still helped you build a better company if you can hit your forecast and actually build a great business. And this is based on the idea that they're already revenue generating and already you could scale up from some revenue number?

21:39Yeah, right now I'm focusing on companies with some form of revenue, but the goal in the future is to have all types of companies because again, going back to the first principles, right? The reason why fundraising is hard and annoying is because there's a fundamental disconnect between a founder's projections and investors' belief in their projections. Because if you think about it, if the investors actually believe the founder's projections, then you shouldn't invest in every single company because they're always up into the right. If you actually believe it, you shouldn't invest in every company.

22:08But the reality is investors don't. And the thing that makes things worse, founders are incentivized to sort of juice the numbers because they're all taught, oh, you have to talk about a Decker coin, unicorn, major outcome, or else investors aren't interested. Well, that's going back because investors are sort of these mega funds and looking for these mega exits and only 20 plus percent of Decker coins. So both sides, people are sort of incentivized to sort of not align on the financials or projections. So the thing here is if you can just get the founder to set their own projections that they believe in and align the capital to their own projections, then you should hopefully align to and end up with great sort of businesses that if you can hit projections are going to be good investments.

22:51So to answer the question, over time, I do hope to support companies pre-revenue as well, because so long as you can make a forecast and hit those forecasts, then I want to fund you because that's as simple as it should be. If you can hit forecast and build a great business, then you should get funding, whether you need it or not separate, but you should at least get the opportunity for that. To play devil's advocate, historically, I think something like three out of four startups did not give back 1x their money at the Series A, not even at the seed, but at the Series A. How do you make that work with a 2 to 3x return at that stage if you're capping yourself?

23:23That's a good question. And so one is, I think the probability of success will be much higher now with AI and these leading AI methodologies. because it's easier and cheaper than ever to start a company before you had to raise a lot of money hire a bunch of people spend a lot of time on r &d get the product to market by the time you have this large team um you have you know hired series a for example 20 30 50 people in those cases yeah you might actually die you might actually run off a cliff because you have this high burn and you can't grow revenue fast enough or whatever you have all this fixed costs of people labor etc you might actually die but now with the lean ai approach you can get to that level of skill with a very small team and a bunch of ai tools right you don't need to hire a lot of engineers you don't even need to know how to code sometimes and by keeping being lean nimble and scrappy you have auctionality and flexibility right like you're not going to fall off a cliff because you're for five people you can always adapt like you can always pull back here spend less or more marketing but you're not you don't have this fixed large fixed cost base where suddenly you run out of money and you fall off a cliff so one is the cost a lot lower you have more control and flexibility and you're more nimble so you can adapt quicker and you can adjust so i think that's that's why i fundamentally believe survival rates are going to go up and what i often look for in these founders is as you know a lot of times companies die not because of competition but because of suicide because the founders give up they get bored they do something else so really it's more about the resilience of the founder and their sort of persistence and sort of conviction versus like, oh, we're going to overspend, hire too many people and run out of money.

24:58It's more about them just maybe giving up as a failure mode. So that's one on the cost and problem of success. And then on the return side, oftentimes you'll see, right, these are because oftentimes you see companies that are great companies who are now zombie companies because they're not going fast enough and they don't have an exit opportunity. The prep stack is way too high. And early investors get washed out. So I think you also see a lot of reasons why investors don't return capital. It's not because these are not good companies. It's just it didn't fit the venture model. And when you're stuck as a sort of zombie company, zombie unicorn company, right?

25:36Everybody's stuck and you're not getting your money. Whereas if you're doing it on a rupture royalty basis, it doesn't really matter if you get stuck at 20, 30 million AR, right? Because I'm getting a revenue split of that. so I can still get my return and my money and I don't need to pray or depend on an exit. And oftentimes, as you know, these exits, the company has to be growing really quickly and the mark has to be right and the sort of multiples have to line up. So if you're investing in a high multiple and the multiples don't catch up, yeah, you're underwater. But here, if you're investing and they're growing, oh yeah, seriously, if you're investing and they're making money, even if they get stuck and the multiples are low, it doesn't really matter because I can recycle the capital, do rep share royalty and then reinvest in more companies.

26:18I like a lot of parts of this concept. I like the seed strapping. I like the term they popularized. I like the higher return of capital. I worry about the misalignment where you're being paid off of revenue and you're also getting capped at the upside that invariably misaligns you with the founder, not in every way, but in certain ways. And I think if founders went about just raising less money and not chasing the headlines, the$5 million seed round, like you mentioned, there could be more concentric circles that work better for the founder and the GP. for sure right and that's why after many iterations i've structured it more like a line of credit so it's up to the founder how much they want to take uh right so they don't need to use all of it uh whereas for a traditional equity if you get a final seat that's all of it right even if you don't need it that's all of it on your capital you can't give it back whereas here it's meant to be structured in a way that's founder's option so yeah if they want the headline and some big number because they feel psychologically better that's cool but you don't actually need to use all of it and oftentimes i've actually paired this with traditional equity funding right so suppose they want to raise a two mil round um they raise a million equity and a million in this new format and so that way they don't need to over dilute themselves and instead of doing a two on 20 right maybe now it's a one on 20 and another one on this rev share model and that's only five percent dilution right so that's oftentimes good to pair it as well You just looked up the numbers, roughly 50 to 70 % of seed stage companies failed to get to Series A historically.

27:53You believe there will be much lower death rates or much higher survival rates for startups. What percentage of these lean AI startups do you think will make it as defined by being ongoing businesses in the future? That's a question. I think the metric you mentioned is fail to raise a Series A, right? But I think that is maybe no longer the definition of success or failure. whether you raise a series A or not, maybe it doesn't matter because you're seeing companies here on the leaderboard that are just blowing past series A numbers. So I don't know that raising consecutive rounds of funding is a true success metric.