May 1, 2025 · 1h 28m · 20vc
What Does it Take to Be Good at Series A and B Today? · 20VC with Harry Stebbings
Rory O'Driscoll · 31m spoken Jason Lemkin · 21m spoken Fabrice Grinda · 18m spoken Harry Stebbings · 8m spoken
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
This episode of the 20VC podcast features a dynamic panel debate with Harry Stebbings, Rory O'Driscoll O'Driscoll, Fabrice Grinda Grinda, and Jason Lemkin Lemkin exploring the realities of the modern venture capital landscape. They dissect the structural liquidity crisis, the speculative AI bubble, shifting early-stage valuation dynamics, and the psychological demands of managing decade-long startup lifecycles.
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 11.4% of the talking time here. How this is scored →
Harry as informed peer 5.0 Guest teaching 5.9 Guest disagreement 3.4 Harry pushing back 4.3
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 1:24:16 Jason's critique of European work ethic and baguette culture
Jason forcefully criticizes European candidate expectations around taking a month off to think about AI, warning that 'baguette culture' teams dilly-dallying will be completely destroyed by SF founders.
Hardest push from Harry ▶ 1:18:32 Harry pushing back on Fabrice's dismissal of EuropeHarry refuses Fabrice's framing that European founders must move to the US to build big companies, calling it a classic glib statement and citing lower salaries, higher retention, and European breakout success stories like Pigment.
Biggest teaching moment ▶ 1:03:27 Rory on Series A risk inflationRory reframes the entire Series A landscape for Harry, explaining how the market shifted from paying Series B prices for Series A risk to paying Series A prices for raw seed-stage risk, requiring superior picking ability.
Harry holds his own ▶ 1:01:02 Harry exposing 400k ARR fake product-market fitWhen Rory asserts that Series A investors require proven product-market fit, Harry hits back with on-the-ground SF evidence, noting that 400k ARR from YC batchmates isn't real PMF, forcing Rory to admit 'okay, you caught me'.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| State of Venture: AI Hype and Valuation Traps | 3 | 5 | 2 | 2 | Harry opens by asking Fabrice and Rory for their macro takeaways on the state of venture capital. Fabrice highlights the AI bubble and LP illiquidity, while Rory humorously notes that non-VCs have zero sympathy for VC valuation complaints. | |
| The Permanence of Liquidity Shifts and AI Gold Rush | 5 | 5 | 3 | 5 | Harry quotes a major endowment fund questioning whether liquidity issues are structural or temporary. Jason details the fast news cycle and Bay Area AI gold rush, while Harry presses Fabrice on whether avoiding AI hype means missing out on rapid growth compared to slow B2B software. | |
| Megatrends vs. the Under-Digitized B2B Market | 2 | 7 | 2 | 1 | Rory steps in to ask Fabrice how he weighs technical obsolescence risks against off-megatrend safety. Fabrice delivers a detailed masterclass on why under-digitized B2B markets like gravel and petrochemicals represent massive, safer megatrends. | |
| The Venture Math: Speed of Returns and IRR Degradation | 5 | 6 | 2 | 3 | Harry cites Josh Koppelman's tweet about speed of returns mattering as much as multiple. Rory educates the group on the three levers of fund returns, explaining why exit timing makes IRR the hardest metric to control. | |
| Venture Strategies: Recycling Capital vs. Concentrated Long Holds | 5 | 6 | 4 | 6 | Fabrice explains taking early secondaries to lock in IRR, leading to a debate on holding winners versus taking early liquidity. Harry pushes back directly on Jason, pointing out the paradox between wanting 5x checks and insisting 1x fund returns aren't worth getting out of bed for. | |
| Grading Our Own Exams: Private Valuation and IRR Illusions | 5 | 6 | 3 | 4 | Harry questions whether private IRRs are reliable. Rory compares private valuations to students grading their own exams while the teacher is on strike, and the panel discusses the misery of subscale public companies. | |
| Sprints vs. Marathons: The Psychology of the 15-Year Founder | 6 | 5 | 3 | 4 | Harry highlights recent high-profile founder-CEO departures and asks if 15-year founder journeys are unsustainable. He draws on his own deranged work ethic to explain why he looks for obsessed, non-normal founders built for the marathon. | |
| Terminal Tech Decay, Vertical AI, and the SPV Detour | 5 | 6 | 3 | 4 | Harry raises the threat of accelerated terminal tech decay in legacy software due to AI. Rory points out that tech obsolescence cycles are now shorter than VC private holding periods, creating existential reinvention crises for startups. | |
| Behemoths, Teenagers, and the Box AI Case Study | 5 | 6 | 3 | 5 | The panel discusses enterprise AI adoption across ServiceNow, Salesforce, and Box. Harry presses on why Box's aggressive AI integration has not translates into higher public market valuation multiples. | |
| Value Creation, Extraction, and AI Tool Pricing Models | 5 | 6 | 2 | 4 | Harry introduces the dilemma of AI tools like Cursor and Windsurf creating immense value while slashing prices. Rory and Jason break down how barbell pricing models capture enterprise upside while offering low-friction entry points. | |
| Market Over-saturation, Capital Inefficiency, and AI Valuation Risks | 6 | 5 | 3 | 5 | Fabrice cautions that overfunded AI subsectors destroy investor capital. Harry demonstrates concrete market knowledge by citing a friend's model company investment that grew from a 4B to 60B valuation but yielded only a 3.1x multiple due to massive dilution and stock compensation. | |
| The Series A Conundrum: Product-Market Fit vs. Valuation | 8 | 6 | 5 | 8 | When Rory argues VCs must play the AI megatrend, Harry challenges him directly, insisting pre-seed/seed investing is about backing generational founders regardless of trends. Harry then dismantles the illusion of early product-market fit, calling out 400k ARR in San Francisco as mere friend-group contracts. | |
| Early Stage Risk and the Evolution of Seed Funding | 7 | 7 | 4 | 6 | Harry explains that multi-hundred-million-dollar pre-seed funds force early stage VCs to hold onto winners and pre-empt Series A rounds. Rory concedes that Series A investors today are forced to pay Series A prices for seed-level risk. | |
| Geopolitical Risks: Funding Chinese AI Companies | 5 | 6 | 3 | 4 | Harry brings up Benchmark leading a 75M round in Chinese AI startup Manus and asks if Western VCs should fund Chinese AI. Rory separates pure financial deal risk from firm-level political and regulatory risk. | |
| Geopolitical Red Lines and the Rise of Defense Tech | 3 | 7 | 4 | 2 | Fabrice outlines his geopolitical red lines in China and Russia before detailing his investments in Ukrainian defense tech. He introduces 'cost per kill' as the primary unit economic metric, prompting comedic banter from Jason about VC pitch decks. | |
| Europe vs. US: Talent Arbitrage, Drive, and "Baguette Culture" | 7 | 6 | 7 | 8 | Fabrice advises all European founders to move to the US, prompting strong pushback from Harry who rejects the glib dismissal of Europe and points out lower talent costs and high retention. Jason forcefully agrees with Fabrice, criticizing European 'baguette culture' and lack of drive compared to SF. | |
| The AI Productivity Boom and Farewell | 3 | 5 | 5 | 3 | Jason reiterates his warning that tech companies retaining relaxed European work hours will be destroyed by intense SF engineering teams. Harry jokingly wraps up the show before Jason offends an entire continent further. |
Statements from this episode (53)
Lemkin: 1x venture fund returns are no longer worth the effort
“One X is not good enough for me anymore at this point in life. It's not worth it. I want three X the fund.”
O'Driscoll: Series A investors are paying Series A prices for seed risk
“The problem with Series B is if you get it wrong, you end up effectively paying Series B prices for Series A risk. And it's exactly correct now at the A. You're paying Series A prices for seed risk. But the whole point of having to be good at this job is being…”
Grinda: Tech remains in the middle of an AI bubble
“We're still in the middle of an AI bubble. If you look at like the amount of money that's going into AI versus every other category in terms of valuations raised, the amount, the number of companies getting funded.”
Grinda: Best time to invest in VC, but avoid all-AI funds
“I think it's the best time to invest, but the, in a way, investing in venture right now is contrarian, and I think you should be investing in funds That are not going after the lovingy, you know, AI, all AI, all the time category.”
O'Driscoll: VC is currently stuck in high valuations and tight exits
“Right now we have the low, low quadrant. It's very expensive to do these new great deals and at the same time, exits are tight.”
O'Driscoll: Companies will stay private until LP capital in VC shrinks
“Until while they keep putting money into the asset class, it will remain a stay private for longer asset class. And once the capital in the asset class reduces, then we'll go back to going public earlier.”
Lemkin: Current AI boom is a bigger gold rush than 2021
“I think we can talk about liquidity and all this, but I honestly think that today is a much bigger gold rush than 20, 21 or other times we get like, I've never seen such a goal because this gold rush goes all the way down to high school kids.”
Grinda: Investors underestimate the risk of total loss in fast-scaling AI
“I feel people are underestimating the risk of zeros, even though something can go from zero to a hundred million AR very quickly, and usually they're priced accordingly. And I, you know, I care about, like, what am I, what returns, what do you need to underwri…”
O'Driscoll: Scaling to an IPO requires a megatrend, not just hard work
“Any company that has to go from a million in run rate revenue to three hundred million, which is what an IPO looks like. You need something more than hard work. You need some kind of mega trend behind you.”
Grinda discloses target entry valuations: $4M pre-seed, $10M seed, $20M Series A
“I'm coming in at Four pre at pre-seed, at 10 pre at seed, and at 20 pre at A's, and I feel very comfortable that in 10 years, these will be much, much larger with valid business models, and we less risk of disruption.”
O'Driscoll: Selecting four winners out of twenty deals is 100% controllable
“There's, you know, picking. Picking out of, we do 20 deals, four of them have to be great deals. That's a hundred percent in your control. If you can't get that right, you should lose your job.”
O'Driscoll: Scale's 2014 fund gained 1x purely from multiple expansion
“We have an excellent, 2014 fund that exit in 20, 21. And we always tell our piece one entire turn of that fund we don't deserve. It was multiple expansion.”
O'Driscoll: VC exit distributions expected in 2024 delayed to 2026
“The hardest thing to control is IRR because the timing of those exits, you know, everyone now is suffering IRR degradation. They're going to get the same return in 20, 26 that they thought they were going to get in 20, 24.”
Lemkin: 2017 fund performance stands at 4.31x return and 32.56% IRR
“I was looking at my 20 17 fund, and it is at, here, here's the question to, maybe especially to Rory, my virtual mentor here. It's at 4.31 X. With a 32.56 IRR, ok?”
Grinda: FJ Labs maintains 30% IRR by selling winners early
“I want to say the cheat code I use for IR, why I still can get 30% IR today, is the virtue of being diversified means I own two, one to three percent of any of the companies, and so what I've been doing is getting secondaries on the way up. So, I've been doing…”
O'Driscoll: VC funds should maximize return multiple rather than IRR
“I don't think the algorithm is maximize IRR. Logically subject, and I'm such a geek, subject to some caveats, the real algorithm is maximize multiple subject to a constraint on IRR.”
O'Driscoll: Selling known winning portfolio companies escalates investment risk
“What you end up doing, it always amazes me when I end up selling the company that I know really well, where I've been on the board, I have a pretty good sense of what it's doing and I'm six years in, to reinvest at a slightly higher revenue multiple in a compa…”
O'Driscoll: Lack of IPOs means VCs are grading their own exams
“Because there's no IPO, relatively no IPOs and M&As, there's no feedback loop. Like we're grading each other's exams and we're all saying we're getting A's, but teacher hasn't graded the test yet, right?”
Grinda: Taking companies public took all the fun out of founding
“And then I built three large venture-backed companies, and two of which ended up being public, and I was like, the last thing I would ever want is to be public ever again. Like, in fact, that took all the fun out of being a founder for me.”
O'Driscoll: Lower cost of private vs public capital is an anomaly
“It is absurd to think that one person is getting capital where you can trade it every day and the other company is getting capital where you're locked up for five years. How in God's green earth, if the companies are the same, Does the first company not have a…”
Lemkin: Founders of subscale IPOs growing 20-30% are all miserable
“Everyone that I know directly or indirectly that had a, that has a subscale IPO. Yeah. Okay. That I, that tried to IPO in the 100,000,200 million range that's growing 20 or 30% today or wherever they are, they're all miserable.”
O'Driscoll: Companies with $100M-$150M revenue and 50%+ growth should IPO
“A company to be, a company at a hundred, hundred and fifty million with 50, 67% growth should be able to go public is my belief. In other words, 500 is too high.”
O'Driscoll: Dot-com boom saw 350 IPOs averaging $18M trailing revenue
“The year of the great dot com explosion, it was literally 350 IPOs meeting and trailing revenue, eighteen million, and that was clearly too early.”
Lemkin: 90% of B2B companies have a founder CEO at IPO
“90% of B to B companies at IPO have a founder CEO at the top. 90%.”
Lemkin: Founders disliking Wall Street should step down 12 months pre-IPO
“If you're a founder and you like big teams and you like scaling, but you don't want to do the IPO, leaving 12 months before the IPO is the right time, right? The market's not going to be shocked, and you like scaling, you like people, you just don't want to de…”
O'Driscoll: Flawed founder CEOs outperform professional non-founder managers
“A founder CEO with some managerial limitations usually performs a lot better than an excellent, a reasonably good manager with no founding DNA.”
O'Driscoll: Every software startup will face an existential crisis before IPO
“My number one fear is That the technology life cycle to obsolescence is now shorter than the holding period of privately held software companies, which means every company at least one time before it gets to go public will have an existential reinvent itself s…”
O'Driscoll: First-gen SaaS companies hit technical obsolescence after 10 to 15 years
“For kind of, Core first generation, what we refer to as plain vanilla SaaS. It's highly likely that, you know, 1015 years in, if you haven't exited, you have some degree of technical obsolescence.”
Grinda: AI disruption benefits startup marketplace incumbents over legacy giants
“The AI disruption is actually benefiting startup incumbents, because they have the data modes, and so it doesn't benefit eBay, you know, because they're slow and big, but it benefits, you know, an incumbent startup that has already liquidity, that is the most …”
Grinda: OpenAI and horizontal LLMs will dominate most AI model categories
“At the fundamental LLM level, I think the horizontal, you know, GPT may just win most categories. The same way that Google won search reasonably read large, except maybe kayak for travel. I suspect, I think OpenAI and JGPD win most of the LLM type categories”
Lemkin: AI will strengthen enterprise software and weaken SMB leaders
“I think AI helps the enterprises on balance and hurts the SMB players on balance. The SMB players just don't have as deep. They have a lot of data, but it's not as deep. You can disrupt them faster. The sales cycles are quicker. I don't know this. We'll see th…”
O'Driscoll: Box's valuation suffers from competing against free Microsoft and Google
“The reason the stock price is always hard is we're competing against Microsoft and Google who give it away for free.”
O'Driscoll: Lowering entry pricing for AI tools is shrewd upsell strategy
“Having tiers of pricing where you get lots of people using the base product and then escalating steps of value as you deliver more value probably is the simplified version of quote unquote value pricing in much the same way as open AI has 2202 thousand. Right.…”
Lemkin: HubSpot's Essentials edition accounts for 45% of new customers
“HubSpot two years ago didn't even have this essentials edition, which is like 45% of the new customers and more enterprise.”
Lemkin: Enterprise AI coding tools can absorb LLM API costs
“That's a quietly better model than it looks, right? And it probably can scale and absorb some significant costs From open AI and Anthropic right at that level.”
Lemkin: Destroying Cursor and Windsurf is existential for Microsoft's GitHub
“Co-pilot versus Cursor and WinServe is number friggin' one on their gotta kill list for Microsoft, number one. It's all over. It is existential for that, for GitHub to destroy them.”
Grinda: AI price competition will destroy investor value before winners emerge
“While I do think eventually a winner to emerge and they'll have the proper pricing power, and I do think in the long run you're able to extract value when you create value, there may be a lot of investor value destruction on the way up because people are compe…”
Grinda: FJ Labs avoids early AI deals, preferring to invest in winners
“And that's why I've been staying at the sidelines, especially considering the valuations they've been raising at. I'd rather pay up when one of them seems to be the dominant winner, and I suspect that then price and traction will be more aligned.”
O'Driscoll: VC investors cannot afford to completely walk away from AI
“It mightn't be the best venture return, but I just think on these broad trends, not showing up. Yeah. Trying. Just walking away from the trend entirely is just too hard.”
O'Driscoll: Excess market capital is massively eroding venture returns
“The capital is definitely massively eroding the returns.”
Stebbings: $400K ARR does not constitute product-market fit
“I see these deals every day in SF, Rory, and they're 400 K in ARR. That's not product market fit.”
Lemkin: Greenoaks backed Codium before the team pivoted entirely to Windsurf
“When green Oaks doubled down on windsurf, it was codium, which essentially the company abandoned three months ago. Every, every engineer was repurposed to build a better version of cursor called windsurf.”
Stebbings: Benchmark led $75M round for Chinese AI startup Manus
“Manus raised seventy five million for its last valuation led by Benchmark. It's a Chinese company.”
O'Driscoll: Sequoia abandoned billions in value exiting China
“We saw very intelligent investors, Sequoia, people like that get out of billions of dollars Of value because they just wouldn't want to be there.”
Grinda: Ukraine could become the manufacturing hub for defense technology
“I'm investing a lot actually in Ukrainian defense startups, because I think my vision is that Ukraine could become the manufacturing hub for defense.”
Grinda: Anduril products are extraordinarily high cost and not battle-tested
“Endural, and look, I'm an investor in Endural. The problem is their cost is extraordinarily high, and so the way you measure this is cost per kill, and they're not battle-tested.”
Grinda: US lacks manufacturing capacity and would lose a war with China
“Right now, we don't have the manufacturing capacity. We would lose a war with China right now.”
Grinda: Scaling $100M to $200M in US is easier than $0-100M abroad
“If you're at a hundred million revenues, it's easier to go from a hundred to 200 in the US than zero to a hundred anywhere else, and that's true at a billion.”
O'Driscoll: Enterprise tech R&D can be anywhere, go-to-market must be US
“For enterprise technology companies, your R&D can be anywhere, your go-to-market will have to be in the US.”
Lemkin: B2B software companies that fail to dominate AI will die
“Your companies are going to go under if they're not dominating AI in their market in B to B, they're all going to die.”
Lemkin: Salesforce commits 20% of its code through AI
“Even Salesforce commits 20% of their code through AI.”