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
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
This episode features Harry Stebbings alongside venture capital legends Jason Lemkin, Rory O'Driscoll, and Roger Ehrenberg in a dynamic roundtable discussion covering major industry developments. The conversation kicks off with Industry Ventures' $665 million acquisition by Goldman Sachs, analyzing the strategic rationale and market valuation at roughly 10% of assets under management. (09:02) The group then dissects Andrew Tulloch's controversial departure from Thinking Machines (valued at $10 billion post-money) to rejoin Meta for $3.5 billion, sparking heated debate about founder loyalty and fiduciary responsibility. (18:05)
• Main Theme: The increasingly transactional nature of venture capital, from mega-acquisitions and founder departures to concentrated AI investments and the challenge of portfolio construction in an era of compressed investment cycles
Speakers
Harry Stebbings
Host of 20VC podcast and founder of 20VC venture fund. Known for his media-first approach to venture capital, Harry has built one of the most influential voices in the startup ecosystem through his podcast platform and investment activities.
Jason Lemkin
Founder and Managing Director at SaaStr Fund, focusing on early-stage B2B software investments. Jason previously founded EchoSign (acquired by Adobe) and has become a prominent voice in SaaS investing and entrepreneurship education.
Rory O'Driscoll
Managing Director at Scale Venture Partners with over 25 years in venture capital. Rory co-invested with legendary VC Arthur Rock and has a track record of successful growth-stage investments across enterprise software and technology companies.
Roger Ehrenberg
Veteran investor and founder of IA Ventures, recently launching a new institutional fund after managing his own capital. Roger previously worked in risk management at major financial institutions and has a strong background in financial markets and options theory.
Key Takeaways
Asset Management Businesses Are More Monetizable Than Pure Investment Partnerships
Industry Ventures' successful exit to Goldman Sachs at $665 million illustrates how fund-of-funds and secondary businesses can be fully monetized in ways that traditional venture partnerships cannot. (09:02) The transaction valued the business at roughly 10% of assets under management, similar to other institutional asset managers. As Rory explained, "You couldn't do that with a venture firm because in the end, all you have is the three people, and if you cash them out 100%, then you don't have anything." This highlights the strategic value of building scalable, process-driven investment businesses versus personality-dependent partnerships.
Unprecedented Wealth Fundamentally Changes Behavioral Economics
The Andrew Tulloch situation reveals how massive financial incentives can override traditional notions of founder loyalty and responsibility. When offered $3.5 billion to leave a $10 billion post-money company he co-founded, Tulloch's departure sparked debate about fiduciary duty. (18:58) As Rory astutely observed, "Once you're not playing a multi-period game and when someone offers you 3.5 billion dollars, you're no longer playing a multi-period game. You're playing a one and done. You're going to get bad human behavior." This shift from multi-turn to single-turn games increases outcome volatility and reduces the effectiveness of reputation as a governance mechanism.
AI Investment Demand Far Exceeds Current Supply Capacity
The conversation around SoftBank's $5 billion margin loan and massive AI infrastructure spending revealed genuine supply-demand imbalances. Jason's firsthand experience building AI applications provides concrete evidence: "I could use 100x the tokens. Even now, like I got to wait like twenty minutes to build one feature... Our agents could all do more." (37:02) This isn't speculative demand but actual constraint on productivity today, suggesting the infrastructure investment wave has fundamental economic justification beyond mere speculation.
Portfolio Construction Must Adapt to Compressed Investment Cycles
The speed of AI-enabled company building has fundamentally altered early-stage investing dynamics. As Jason noted, "It's just crazy what you can build so quickly today. It makes it so competitive." (40:13) This compression means the traditional "sweet spot" where investors can identify winners before valuations spike has shrunk dramatically. Roger's strategy of starting with 20-25 companies and then concentrating 75% of capital in 3-5 winners through aggressive follow-on investments becomes more critical when the window for advantaged investing narrows to months rather than years.
Regulatory Arbitrage Creates Massive but Volatile Opportunities
The prediction markets space exemplifies how regulatory differences can create enormous value capture opportunities. Both Polymarket and Kalshi have built billion-dollar businesses primarily by offering sports betting functionality without traditional sports betting regulations. (44:45) Roger identified this as "the purest regulatory arbitrage play of all time," where companies race to achieve scale before facing parallel regulatory scrutiny. However, these advantages can disappear overnight with regulatory changes, making them high-reward but high-risk investments requiring careful political and regulatory analysis.
Statistics & Facts
- Industry Ventures sold to Goldman Sachs for $665 million with potential earnouts up to $300 million, representing roughly 10% of their $7 billion in assets under management - a valuation methodology consistent with other fund-of-funds businesses. (09:02)
- Andrew Tulloch left Thinking Machines (valued at $10 billion post-money with $2 billion in funding raised) for a reported $3.5 billion offer from Meta, representing a 75% premium over his theoretical stake value. (18:05)
- Lovable achieved over $170 million in ARR within their first year of operation, demonstrating the accelerated growth possible with AI-enabled development tools. (40:33)
