The Ledger
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Open-source models will not displace top foundation models like Anthropic
“I think the foundation models, let's say specifically Anthropic, have such special models. This can be hard for somebody to just kind of say, I've used open source with my data. It's going to be functional and positive for some amount of what you're doing, but…”
Small stakes in massive outliers beat high ownership in mid-sized exits
“You have to be in the big outliers to drive great returns, and you're better off being in them at a very small percent than owning a large percent of a company that exits for three to 500. Those just aren't going to move the needle.”
Lovable scaled from zero to $300M ARR within one year
“Where you see a company go from zero to something like three hundred million in a year. I think we intercepted them around, well, we kind of got, tried to get in when they were around 30, 30 of error, but we around, we did was around one 50.”
AI compute costs cap startup gross margins at 60% to 70%
“You know, a lot of companies, just because of the cost of computing inference, it's harder to say you're going to be an 80, 90% gross margin company anymore. But, you know, great companies are, you know, 60, 70% gross margin.”
Using Anthropic drives higher retention and revenue than open-source models
“What's happening is companies see this, like, yes, I can get lower cost, but if I use Anthropic, it actually increases my customer retention. I generate more revenue. I get users to Engage with the platform more. And that is what the data is suggesting now wit…”
Menlo Ventures' Anthropic position is worth over $10 billion
“No, our position is, is north of that, but that's not that you can do the math on what carry usually is.”
Market will not sustain 60 independent AI model companies
“There's no way in hell that, you know, we're going to have 60 independent model companies in addition to all the open source and everything.”
Anthropic matched ChatGPT performance pre-launch using 1/50th of the capital
“All the benchmarks you could see that they were kind of better or at the same level of performances as ChatGPT at the time. And they'd spent like, I don't know, A 50th of the capital.”
Foundation model markets will never be dominated by one player
“These markets are never dominated by one player. There's going to be an alternative.”
VC funds should never sell early stakes in outlier winners
“Like I think if you're a believer, I think more than ever, we're in an environment where your outliers, your winners will compound and drive fund returns. So those are certainly not the ones you want to sell from.”
Bad actors harm secondary markets by marketing fake startup access
“I think the problem is, you know, it's secondary markets, SPVs, they've just become, Too annoying and aggravating in the market to founders. And someone else is basically like, I don't want you marketing my stock. My, and I want to be the one who's figuring ou…”
Enterprise AI workloads will split across proprietary and open-source models
“So I think, you know, you're going to have the combination of something like that, a family of models from Anthropic, and then a set of open source models and things that you train with your own data, and you're going to look across that whole tapestry and say…”
OpenRouter is wildly profitable and operating at unexpected scale
“Like this company wildly profitable and, you know at a scale that would probably shocked most people”
Menlo Ventures raised its instant seed check limit to $8M
“We've got the specific seed strategy where three partners can, you know, right up to an eight million dollar check, like on the spot that used to, that number used to be three.”
Negative signaling from institutional seed investments is obsolete
“Everyone used to make this argument in the seed world, like, oh, there's negative signaling if you let an institution in, in there, and I think that's kind of out the window, As well, because for the right companies, like everybody's getting preempted and the …”
Multi-team VC platform expansion destroys partner alignment
“When you go full, full stack and you have like five different teams, you start doing sector, like everybody's kind of out for a pass and Sometimes I've seen this in other places where you feel like, well, I could do whatever I could do great things, but I can'…”
Menlo Ventures broke its standard investment criteria to back Anthropic
“And I'll, that's, I'll take you back to our investment in, in Anthropic. Like, same thing. It's like, This doesn't really fit. This isn't what we normally do, but wow, if this works, I mean, you got such a special founder in Dario and an amazing market.”
European founders have more grit than Bay Area founders
“There's kind of more grit to be a great entrepreneur in Europe than let's say in the Bay area where, you know, it's not that it's not incredibly hard to get into YC and just be a founder. I think in Europe, it's always been a lot harder.”
Small initial check increases next-round lead likelihood by 10x
“And I would say if you get even a wedge into a company, you're 10 X more likely to be able to participate significantly in the next round or lead.”
AI startups are reaching $100M revenue in one year
“When we look around and see these companies doing zero to a hundred in a year, never seen anything like it. And there's more examples of that than I can probably count right now.”
Outlier venture investments do not require internal partnership dissent
“I don't really ascribe to this point of view where you need like a bunch of no's and there's one person who's a yes, and that leads to an outlier. I know there are examples of that, but that's not really been my experience in the firms I've been part of or wit…”
Menlo Ventures invested $10M in Anthropic before raising $500M+ SPV
“The first check was a little over 10 and then, you know, the, so that was kind of the starter check because the average, like I said, you try to kind of, you know, venture fund kind of have this kind of narrow window of what you invest, but then the next round…”
Menlo Ventures does not aspire to raise a $10B+ fund
“We don't have a 10 or twenty billion dollar fund, nor do we aspire to have that.”
Menlo Ventures signed Anthropic term sheet two weeks after LP meeting
“So we literally came out of that meeting and said, all right, we've got to do this. We've got to figure out a way to lead the round. And two weeks later, We signed a term sheet. We, you know, aggregated all the kind of demand from RLPs and folks we knew and, y…”
Menlo's $500M+ Anthropic SPV was the firm's first ever
“Menlo had never done an SPV before. It just happened to be over five hundred million.”
Legal AI startup Legora plans to expand into tax and accounting
“I mean, look, Max, I guess maybe he hasn't been as public about it, but absolutely that's part of the strategy. You know, when we got to know each other and we were thinking about the round and justifying not only the current round and hopefully, you know, par…”
Lacking a prior relationship is the main reason VCs lose deals
“The thing that's most often is that you were late to the party, right? Like, you know, you were not intentional enough that this was a company that you wanted to be tracking and building a relationship, so you're coming in, you know, a couple weeks or a month …”
VCs rarely lose deals on valuation alone for top companies
“It's rarely just, like, straight up, you know, valuation, stuff like that. Yes, valuation can be painful. But for the right companies, you know, you do what it takes to be in.”
Menlo Anthology fund backed 50+ startups including OpenRouter and Whisper
“Like that's over 50 companies, somewhere between a hundred K and one million where you kind of get in a seed round and the companies that have graduated out of that have been open router, whisper, axiom math.”
AI developer stack startups are rapidly taking off after early struggles
“So there's so much more there, and I think we started off investing in that area two, three years ago. Nothing really came out of it. Now these companies are really taking off.”
Menlo Ventures pivoted its investment strategy to focus entirely on AI
“We've pivoted the firm to be all in AI.”
Menlo Ventures wrote a sub-$50M check for legal AI startup Legora
“The round that just happened, you know, about six months ago. It was like it was kind of sub-fifty, but in that range.”
Menlo Ventures has invested in approximately seven AI labs
“We have very specific strategy around Neo labs too. We're in about seven of them.”
ElevenLabs' Mati Staniszewski is an outlier founder like Jeff Bezos
“The one company that I've really admired and, you know as the kind of like outlier entrepreneurs, we, in my history going back, like you look at the companies that became great, you know, when I was early days of client, there was like, you know Jeff Bezos and…”