20VC: OpenAI's Multi $BN Deal with AMD | Polymarket, Vercel and Supabase Raise Mega Rounds | Does King Making Really Work in Venture Capital: Harvey vs Legora | Chamath is Back: The SPAC is Back
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
In this week's 20VC episode, Harry Stebbings dissects OpenAI's strategic power plays with AMD and NVIDIA, developer day announcements, and the broader implications for AI infrastructure. (05:11) The conversation reveals OpenAI's unique position of leverage despite burning cash - securing warrants to purchase 10% of AMD while simultaneously receiving investment from NVIDIA. The discussion expands to cover "suicide rounds" in venture capital, the king-making phenomenon in AI startups, and the structural changes reshaping how companies scale and exit in today's market.
- Main Theme: OpenAI's strategic dominance showcases how user traction translates to unprecedented leverage in AI infrastructure deals, fundamentally altering traditional vendor-customer power dynamics.
Speakers
Harry Stebbings
Host and Managing Partner at 20VC, one of Europe's leading early-stage venture capital funds. Harry has interviewed over 4,000 of the world's leading founders and investors, building one of the most influential voices in venture capital through his podcast platform.
Jason Lemkin
Founder and Managing Director at SaaStr Fund, serial entrepreneur who founded EchoSign (sold to Adobe) and built it into a leading e-signature platform. Jason is recognized as one of the leading experts in SaaS scaling and has invested in over 300 SaaS companies.
Rory O'Driscoll
Managing Director at Scale Venture Partners, where he focuses on enterprise software investments. Rory has over two decades of experience in venture capital and has been involved in numerous successful exits including companies like DocuSign and HubSpot.
Key Takeaways
Power Dynamics Trump Traditional Business Models
OpenAI's ability to secure 10% warrants in AMD while simultaneously receiving investment from NVIDIA demonstrates how user traction creates unprecedented leverage. (05:32) Despite losing significant money, OpenAI commands power because they control the users who can actually consume massive chip quantities. This represents a fundamental shift where customer acquisition and retention become more valuable than profitability in infrastructure negotiations. The lesson for professionals: focus relentlessly on building user bases and market position, as these become your greatest assets in strategic partnerships and negotiations.
The "Captain Obvious" Investment Strategy
Successful investing increasingly relies on identifying and backing obvious trends rather than contrarian bets. (52:55) As Rory noted, "the more you do this, the more you just say to yourself, you just need to do big, exciting deals in trends that are absolutely obvious." Companies like Vercel and Supabase succeed by positioning themselves as infrastructure leaders in clearly growing markets. For professionals, this means focusing on sectors with undeniable momentum rather than trying to be too clever with niche or contrarian plays.
Equity for Growth (EFG) Structures
When companies face extended private journeys, re-incentivizing founding teams becomes critical for sustained performance. (44:42) Rory's "Equity for Growth" approach involves granting additional equity tied to specific growth milestones, ensuring founders remain motivated throughout 15-year+ journeys. This strategy acknowledges that traditional vesting schedules don't account for modern company lifecycles. Professionals should negotiate performance-based incentives that align with extended timelines and ensure they have something meaningful to fight for throughout their career journey.
King-Making Through Capital Deployment
In AI markets, early capital advantage creates almost insurmountable barriers to entry. (57:00) Jason highlighted how companies with modest revenue ($2-5M) can secure $50-200M rounds, making it nearly impossible for competitors to challenge them. This phenomenon extends beyond traditional venture returns - it's about market control. The takeaway: when you identify a winning position, deploy capital aggressively to build defensive moats, as being second or third in these markets often means being irrelevant.
Taking Control of Your Destiny
Companies stuck between IPO thresholds and PE interest must proactively create their own paths forward. (43:44) This involves three critical elements: ensuring management teams are properly incentivized for the extended journey, achieving profitability to maintain control, and developing a "second act" typically tied to AI trends. Rather than waiting for external salvation through IPOs or acquisitions, successful companies build independent paths that don't rely on market timing or investor sentiment.
Statistics & Facts
- OpenAI secured warrants to purchase up to 10% of AMD as part of their chip supply partnership, with AMD's stock price jumping over 30% following the announcement. (06:59)
- The median IPO in 2024 had a revenue run rate of $931 million, significantly higher than historical norms. (39:09)
- Teams using HubSpot's new AI platform are reportedly saving 750 hours per week, with one company increasing leads by 251%. (83:19)
