Aug 25, 2025 · 1h 23m · 20vc
BVP Partner, Byron Deeter: The Future of Venture - Why Chanel vs Walmart is BS · 20VC with Harry Stebbings
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In this episode of 20VC, host Harry Stebbings interviews Bessemer Venture Partners' Byron Deeter to explore how artificial intelligence is transforming venture capital, software economics, and liquidity pathways. Deeter discusses the shift toward offensive investing, the rise of billion-dollar micro-businesses, and the enduring power of founder intuition.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 23.7% of the talking time here. How this is scored →
Harry as informed peer 5.3 Guest teaching 4.6 Guest disagreement 1.9 Harry pushing back 4.4
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 15:44 Dismissing labor budget debate
Deeter forcefully dismisses Stebbings' premise about labor budgets, stating 'that question's already being answered. It's not even a debate anymore, Harry. It's over.'
Hardest push from Harry ▶ 20:00 Challenging optimistic workforce narrativeStebbings directly refuses Deeter's optimistic spin on tech efficiency, pointing to thousands of layoffs at Shopify and insisting that young workers are facing a severe disruption rather than a utopian upgrade.
Biggest teaching moment ▶ 3:01 Reframing AI commoditizationDeeter corrects Stebbings' anxiety over AI commoditization by comparing foundation models to AWS, demonstrating how commodity infrastructure layers host the best business models in software history.
Harry holds his own ▶ 6:22 Mathematical challenge on mega-round dilutionStebbings uses specific venture return math to demonstrate how dilution in mega-rounds caps fund multiples, forcing Deeter to explain Bessemer's explicit rule-breaking strategy for generational outcomes.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Reconnecting and Expressing Mutual Appreciation | 2 | 1 | 0 | 0 | The interview begins with mutual warmth and appreciation. Stebbings asks an open-ended question about Deeter's optimism in the current market. | |
| Debunking the Threat of Commoditization in AI | 4 | 5 | 2 | 3 | Stebbings questions defensibility and commoditization in AI. Deeter reframes the premise, arguing that compressed innovation speed is an advantage rather than price erosion. | |
| Navigating Dilution and Capital-Intensive AI Investments | 6 | 5 | 2 | 6 | Stebbings presses on dilution and capital intensity, pointing out how opportunity costs on returns hit investors in mega-rounds like Anthropic. Deeter explains Bessemer's rationale for breaking ownership percentage rules for potential 30x generational outcomes. | |
| Sizing Modern Rounds in a Hyper Power-Law Era | 5 | 5 | 3 | 5 | Stebbings cites Jason Lemkin on deal concentration and asks if traditional vertical SaaS is dead. Deeter dissents, explaining how AI layer additions will expand TAMs similar to payments integration. | |
| Incumbent Platforms and Nimble Disrupters | 5 | 4 | 2 | 5 | Stebbings forces Deeter to choose between incumbents and challengers. Deeter acknowledges incumbent platform advantages while detailing Intercom's Fin product as a disruption case study. | |
| Transitioning Software into the Multi-Trillion Dollar Labor Market | 6 | 5 | 3 | 5 | Stebbings brings up Rory O'Driscoll's thesis on software invading labor budgets. Deeter forcefully declares the debate already settled in favor of expanding into labor budgets. | |
| The Rise of Billion-Dollar Micro-Businesses | 6 | 6 | 4 | 7 | Stebbings strongly pushes back against Deeter's optimistic view on AI tech tools, pointing out real-world workforce cuts at Shopify and questioning impact on young workers. Deeter counters with historical analogies to the Bessemer steel process. | |
| The Rise of AI Supernovas and Shooting Stars | 5 | 5 | 2 | 5 | Stebbings asks if standard T2D3 growth benchmarks mislead founders in an AI era. Deeter outlines Bessemer's state-of-AI research on zero-to-100M revenue supernovas and shooting stars. | |
| Balancing Growth and Efficiency via the Rule of X | 6 | 6 | 3 | 6 | Stebbings pushes Deeter on whether founders should burn cash recklessly for growth. Deeter corrects the host's summary and presents the Rule of X framework balancing growth and efficiency. | |
| Sourcing Customers via Product-Led Growth in AI | 5 | 5 | 3 | 4 | Stebbings describes intense market noise where founders must scream loudest to win capital. Deeter counters that true PLG pull eliminates the need for massive human sales teams in compressed growth curves. | |
| Breaking Pricing Rules and the Cost of Missing Elon Musk | 5 | 5 | 1 | 4 | Stebbings asks how Bessemer justifies breaking pricing discipline. Deeter candidly reflects on his Tesla anti-portfolio mistake, acknowledging how over-indexing on early unit economics made him miss Elon Musk. | |
| Normalizing Secondary Sales in the Era of Late IPOs | 6 | 4 | 1 | 4 | Stebbings asks if venture capital is in a window of hyper-liquidity and if selling secondaries is wise. Deeter confesses his perspective shifted to supporting secondary sales as companies remain private longer. | |
| Legitimizing the Trillion-Dollar Private Cloud and AI Market | 5 | 5 | 2 | 5 | Stebbings questions how much of the $1T Cloud 100 private market value is legitimate versus synthetic hype. Deeter vigorously defends the valuation top-tier assets. | |
| Canva's Long-Term Vision and Bessemer's Century Team | 5 | 4 | 1 | 4 | Stebbings questions why companies like Canva stay private so long. Deeter describes Bessemer's Century Team structure that re-underwrites doubling down on core winners. | |
| Preventing Startups from Choking on Too Much Capital | 6 | 4 | 1 | 4 | Stebbings cites Pat Grady on capital foie gras and admits his own mistakes in evaluating quick valuation markups. Deeter agrees overfunding risks choking startups. | |
| Gut Feeling over rational TAM in Power-Law investing | 5 | 5 | 2 | 4 | Stebbings asks if formal TAM scenario analyses are useless given past underestimation on companies like ServiceTitan and Procore. Deeter explains why memos still require them despite qualitative upside dominance. | |
| Chasing Big Ponds and Exciting Startup Adjacencies | 6 | 5 | 3 | 5 | Stebbings cites Jason Lemkin's strategy of ignoring TAM to focus purely on founder quality and a 3x next-round mark. Deeter respectfully dissents, emphasizing the need for expandable adjacencies in big ponds. | |
| Assessing Early Stock Distributions and Fund Structures | 6 | 4 | 1 | 4 | Stebbings brings up Bessemer distributing Shopify stock early and asks about Sequoia's evergreen fund model. Deeter explains LP liquidity needs and trade-offs of holding public assets. | |
| Maturing Venture: Full-Service Investment Banks vs Boutiques | 6 | 5 | 3 | 6 | Stebbings asks if venture is purely a scale game and offers a 'Chanel vs Walmart' framing. Deeter rejects the Walmart comparison, replacing it with full-service investment banks versus boutique specialists. | |
| Overcoming Identity Crises and Surviving Early Investing Failures | 5 | 5 | 1 | 3 | Stebbings asks Deeter if he ever suffered self-doubt or an identity crisis. Deeter candidly recounts his failed RFID roadmap and losing money on his first three investments. | |
| The Spin-Out Era and Virtuous Performance Cycles | 6 | 4 | 1 | 4 | Stebbings asks if the spin-out fund wave is ending and whether private equity will rescue distressed startups. Deeter breaks down four coming liquidity buckets. | |
| Quick-Fire: Evaluating Partners, Styles, and Staying Hungry | 6 | 4 | 2 | 5 | In the quick-fire section, Stebbings asks for firm picks and points out Deeter chose mature firms over hot new upstarts. Deeter defends the statistical power of proven track records. | |
| Adding a Zero to the Scale of Tomorrow's Tech | 5 | 4 | 1 | 4 | Stebbings asks what Deeter changed his mind on most in the last 12 months. Deeter highlights adding a zero to valuation expectations, predicting multiple trillion-dollar AI outcomes. |
Statements from this episode (53)
Deeter: AI Will Produce Multiple Trillion-Dollar Companies
“I think there's going to be a lot of trillion dollar businesses that are created from this.”
Byron Deeter: AWS is the best business in software history
“And by the way, the best business in the history of software is sitting there with AWS in, in what people refer to as a commodity.”
Byron Deeter: Snowflake had negative gross margins late in its life cycle
“And so you can look at a business like a snowflake that had negative gross margins very late in their life cycle.”
Deeter: Bessemer invested over $100M each in Anthropic, Perplexity, and Canva
“You know, you look at an Anthropic or a Perplexity or a Canva and we, you know, we have, you know, nine figures into each of these companies and yet we are still, you know, well below historical venture standards where you aspire to own 20% or something in the…”
Deeter: Bessemer invested in Anthropic believing it could be a 30x return
“You know, 3.8 X will keep you in business for a long time, but the reason to do it is because you believe it could be a 30 X. And that's the basis of our anthropic investment is we believe that it is a generational company.”
Stebbings: OpenAI round equaled total quarterly SaaS funding market
“Well, I think one of OpenAI's rounds is about the size of the entire SaaS funding market for that quarter.”
Deeter: Top three LLM companies will raise $100B in six months
“I think the numbers right now, the top three LLMs, if you include you know, Anthropoc, OpenAI, and X in there, ah, are gonna raise a hundred billion dollars in this six month period”
Deeter: Ecosystem startups around top LLMs will produce 100x VC returns
“However, there are hundreds of other Really compelling venture businesses that will be created in and around those ecosystems. And I do believe there will be great venture outcomes by from a number of companies in and around those businesses. And so the power …”
Deeter: Adding Payments Doubled TAM and Market Caps for Vertical SaaS
“And as I think back on our vertical SaaS investments, you know, like a Shopify or a Service Titan or a Toast, when they added payments, it became that big Next Horizon unlock for them and really doubled the TAM and the market caps for these businesses.”
Deeter: AI Will Double Vertical SaaS TAM and Valuation Just Like Payments Did
“I think AI is going to do the same thing, that what it can do you know, with Service Titan, as they talk about automating the technician experience and the ability to go out there and have a co-pilot alongside of you.”
Deeter: Canva and Intercom AI products generate hundreds of millions
“I look at a company like a Canva, or I look at a company like Intercom that's at a scale where in some ways they're already becoming an incumbent in those markets, and yet they're disrupting themselves at awesome rates and have AI products that are already, yo…”
Stebbings: Intercom will be the benchmark case study for AI rejuvenation
“I think Intercom will be actually a case study for the most aggressive, ah, re-acceleration, rejuvenation in a world of very changing technology.”
Deeter: Bessemer portfolio company hit 90% automated support with higher NPS via Fin
“I was at one of our portfolio company board meetings the other day, and they mentioned that they had switched from, you know, human-based interventions to the FIN product from Intercom, And they showed the stats of deflections went up, I forget to, you know, 9…”
Deeter: AI Solutions Are Already Tapping Into Labor and Services Budgets
“That question's already being answered. It's not even a debate anymore, Harry. It's over. These tech solutions are absolutely addressing, you know, software, hardware, and services budgets comprehensively, and they're doing it in a very successful way.”
Deeter: Bessemer Is Targeting Vertical AI in Accounting, Legal, and Medical
“We're going down accounting and legal and medical. We're going through these sectors where there's a lot of, you know, front edge humans doing busy work and paperwork, and we're supercharging them.”
Deeter: Epic Has Maintained a State-Endorsed Monopoly in Healthcare
“Epic has had this wonderful state-endorsed monopoly for a long time.”
Deeter: 10-Person Micro-Businesses Will Reach Billion-Dollar Valuations
“I think we're going to see the era of the micro business. I think that we're going to have, you know, 10 person companies that are crossing billion dollar valuations and, you know, kids in schools are going to be able to launch businesses in real time in, in w…”
Stebbings: Young workers face severe AI-driven workforce reductions
“I'm really concerned that there's this generation of 23 to thirty-year-olds who don't have a passion for the craft, who aren't experts in the craft, who are about to get hit by, I think it's this completely naive utopian view of like, oh, we're just gonna give…”
Deeter: Bessemer is evaluating nuclear fusion investments accelerated by AI
“We're looking at, you know, fusion investments now that I think will be supported and accelerated by AI.”
Deeter: Top AI Startups Hit $100M ARR in 1.5 Years
“We're seeing businesses go from zero to a hundred million in 1.5 years. That's the supernova profile.”
Deeter: Growth Is Valued at 2x to 2.5x Efficiency at $50M ARR
“The rule of X mathematically shows it's about a two to two and a half X multiplier value of growth over efficiency at mid-stage scale. Call it fifty million ARR or so.”
Deeter: Economics for Anthropic, Perplexity, and Canva Pencil Out
“And I assure you, one of the coolest things about the profile of anthropic and perplexity and Canvan, these businesses is the math actually pencils out.”
Deeter: AI will mirror top scientists' reasoning within 18 months
“The curve is still up into the right, without a doubt, and I do believe that we will cross over this term. You know, people use you know various different terms about you know, levels of reasoning and awareness and AGI and the like. I have no doubt we're, if w…”
Deeter: Amazon, Google, and AMD chipsets are challenging Nvidia's market dominance
“I do think that we're also getting many more hardware approaches and solutions out there. So that it's not as wonderful as NVIDIA is. It's not just an NVIDIA world anymore. And the chip sets from Amazon and Google and AMD and others are becoming quite capable.”
Deeter: Marketing and Sales Matter Less in the AI Economy Than PLG
“Marketing and sales have less of a role in this new economy than they did before, and that these products in many ways are selling themselves, and product-led growth and innovation is the unlock for This, you know, supernova and shooting star aspirational grow…”
Deeter: Mark Leslie's Sales Learning Curve Model Is Obsolete in AI
“The sales learning curve that Mark Leslie talks about when we backed him, you know, decades ago in Veritas is no longer applicable because you just can't possibly throw the bodies at a zero to 100 growth curve inside of two years.”
Deeter: Passed on Tesla Over Roadster Unit Economics
“One of the most famous and most painful for me was Tesla early on. It's on my anti-portfolio. If you go to the Bessemer website, we have a page dedicated to our screw ups, and that's one of mine. And it was because I couldn't fundamentally see how the unit eco…”
Deeter: Tesla wouldn't have survived without DOE loan
“Without the, you know, the DOE bailout loan and things, Tesla wouldn't have existed, but what I missed was that Elon's a force of nature, a generational entrepreneur, and he put that company on his back and powered through so many subsequent layers that the ne…”
Deeter: Cornerstone On Demand went public with $50M ARR and $700M market cap
“My very first IPO, Cornerstone On Demand, you know, went public with fifty million of ARR, and I think with seven hundred million market cap, and they traded up to billions over time.”
Deeter: Canva, Anthropic, and Perplexity will not go public anytime soon
“Now you look at, you know, Canva, you know, forty billion plus, and Anthropica with seventy billion plus, and perplexity, you know deep into DekuKorn status, and like, these businesses, you know, aren't going public anytime soon.”
Deeter: Secondary liquidity for venture investors is healthy as companies stay private longer
“This is a change in my view. I'll confess that I was pretty hard lined against this, not for founders and teams. I always feel that taking some pressure off of them is good, but I didn't love it when our co-investors were looking for liquidity. Early in busine…”
Bessemer Cloud 100 List Reaches $1 Trillion Aggregate Private Value
“We're over a trillion dollars In private market cap now among just the top 100 cloud AI companies right now which is just a astronomical number to consider.”
Deeter: Bessemer's largest all-time investments include Twilio, Canva, and Anthropic
“So it used to be Twilio. Then you know, probably StubHub, Canva, Anthropic Yeah, probably, probably that bucket.”
Deeter: Bessemer created 'Century Team' to re-underwrite top portfolio companies
“And we've actually added people and processes to make sure that we don't get subject to this kind of mental inertia where we invite in, you know, another partner to look at it and our best deals were constantly saying, You know, okay, we have the century team,…”
Deeter: Bessemer owned 28% of Shopify and Twilio at IPO
“We own 28% of Shopify and Twilio at IPO and we owned, you know, well less than that of Procore and Service Titan just because we, you know, included a lot of other investors downstream.”
Stebbings: Misestimating market size is the top reason great investments are missed
“Market size misunderstanding, misestimation is the single greatest reason why great investments are not made.”
Deeter: VC deals get done when partners champion high-end upside
“By the end of the day, the deals that get done, it's the ones where the partner sitting there saying, I'm pounding the table that the high end and more as possible. And that's, that really is the qualitative overlay that has massive quantitative implications.”
Bessemer distributed Shopify stock to LPs rather than selling directly
“So importantly, we distributed early. We didn't necessarily sell. So what we did is we gave people the choice.”
Bessemer unlikely to pursue evergreen structures or asset management roll-ups
“We're seeing, you know, other firms adding asset management businesses and debt products and roll-ups and doing all sorts of things. You know, there's some kernels in there that we agree with. There's a lot in there we probably aren't going to pursue.”
Deeter: Maturing venture market will crush mid-sized generalist VC firms
“This maturation is going to make it tough in the middle.”
Deeter: Bessemer refuses to hire sector-specific investors or protect cooling sectors
“This is very much why we don't hire sector-specific investors, and we don't give you air cover if your sector goes out of favor, meaning our job's to make RLPs money, and if you're in a sector that's cooling off, you better get the hell out and go somewhere el…”
Deeter: Sector-dedicated VC funds force capital deployment regardless of market quality
“The risk of having a semiconductor fund or a semiconductor team is that, you know, you carve out, pick a number, five hundred million to invest there. Like, you bet your ass they're going to invest five hundred million in semi, whether the right answer was two…”
Deeter: My first Bessemer investment roadmap was in zero-trillion-dollar RFID market
“My first roadmap at Bessemer was RFID, radio frequency identification, which was and is a zero trillion dollar market.”
Deeter: First three VC investments failed before next two hit billion-dollar IPOs
“I had my first three investments were all very bad. My next two ended up being, you know, billion dollar IPOs.”
Deeter: 2019-2020 peak entry valuations washed out many promising venture investors
“Cycles matter a lot. I really feel bad for great potential investors who joined our industry with checkbooks in 2000, you know, two, 2020, 2019. And they did great deals, but at market prices, which were way too high. And many of those people got washed out of…”
Deeter: The best venture capital firms are flat at the top
“The end of the day, I think the best firms are pretty flat at the top.”
Deeter: VC is one of few asset classes where past performance predicts success
“It is one of the few asset cycles where past performance is an indicator of future success.”
Deeter: Vast majority of mature private software companies won't go public
“Vast majority are not going to get public and consolidation will make sense because at the core, a lot of these businesses are very high gross margin and are run pretty inefficiently because we've got a growth mindset and we're certainly not optimizing for cos…”
Deeter: Tiger Global Created Reckless Overfunding and Poor Governance
“There was a lot of happy disruption and big thinking and creativity that, that I applaud. And there was a lot of reckless overfunding and deal work and non-governance that that we're gonna have to clean up for quite a while.”
Deeter: Venture Capital Index Will Underperform S&P 500 Again
“Historically, it has underperformed the S&P and probably will again in this case but you'll make money.”
Deeter: Sequoia Capital Continues to Deliver Platinum-Level Investment Returns
“Quantitatively, I think that, you know, Sequoia continues to mint platinum records.”
Deeter: Anthropic's revenue growth trajectory is unprecedented in tech history
“Like, when you actually see the anthropic numbers that he's now sharing, and like, this is real, and, you know, their path to billions and billions in revenue, and, you know, really compelling unit economics, I just, we have never seen this in the history of o…”