This Week in Startups - YC Valuations, VC Slowdown, and Office Hours with CustomerIQ | E2136

Episode Date: June 10, 2025

Today’s show: Jason and Alex dive into why Y Combinator startups are raising at sky-high valuations with relatively low ARR—what does that mean for investors and founders? VC funds are slowing down and returning to pre-ZIRP pacing, signaling a reset in the market. Plus, in this week’s Office Hours, Sean Steigerwald, founder of CustomerIQ, demos his AI sales agent that lives in your inbox, drafting follow-ups using CRM context. It’s a deep look at early-stage investing, startup efficiency, and where AI is headed in enterprise.Timestamps:(0:00) Episode Teaser(2:09) Jason's Singapore trip recap and SoCal update(9:51) Squarespace - Use offer code TWIST to save 10% off your first purchase of a website or domain at https://www.Squarespace.com/TWIST(11:40) New rumblings from Mistral; is the French AI startup catching a tail wind?(19:40) Fidelity Private Shares℠ - Visit ⁠https://fidelityprivateshares.com⁠! Mention our podcast and receive 20% off your first-year paid subscription.(26:23) VC investing pace is slowing... what does this mean for founders(29:42) INBOUND - Use code TWIST10 for 10% o your General Admission ticket at https://www.inbound.com/register (Valid thru 7/31)(33:33) Founders' guide to raising capital(36:31) Gen AI companies are growing FAST but are there concerns about churn?(42:46) Is YC still worth it? Debating paper gains vs. DPI as metrics.(52:18) Office Hours with Sean Steigerald from Customer IQ: managing active users and more.Subscribe to the TWiST500 newsletter: https://ticker.thisweekinstartups.comCheck out the TWIST500: https://www.twist500.comSubscribe to This Week in Startups on Apple: https://rb.gy/v19fcpLinks from episode:Customer IQ: https://www.getcustomeriq.com/Follow Alex:X: https://x.com/alexLinkedIn: ⁠https://www.linkedin.com/in/alexwilhelmFollow Jason:X: https://twitter.com/JasonLinkedIn: https://www.linkedin.com/in/jasoncalacanisThank you to our partners:(9:51) Squarespace - Use offer code TWIST to save 10% off your first purchase of a website or domain at https://www.Squarespace.com/TWIST(19:40) Fidelity Private Shares℠ - Visit ⁠https://fidelityprivateshares.com⁠! Mention our podcast and receive 20% off your first-year paid subscription.(29:42) INBOUND - Use code TWIST10 for 10% o your General Admission ticket at https://www.inbound.com/register (Valid thru 7/31)Great TWIST interviews: Will Guidara, Eoghan McCabe, Steve Huffman, Brian Chesky, Bob Moesta, Aaron Levie, Sophia Amoruso, Reid Hoffman, Frank Slootman, Billy McFarlandCheck out Jason’s suite of newsletters: https://substack.com/@calacanisFollow TWiST:Twitter: https://twitter.com/TWiStartupsYouTube: https://www.youtube.com/thisweekinInstagram: https://www.instagram.com/thisweekinstartupsTikTok: https://www.tiktok.com/@thisweekinstartupsSubstack: https://twistartups.substack.comSubscribe to the Founder University Podcast: https://www.youtube.com/@founderuniversity1916

So important data here for entrepreneurs to consider the most important things here are that if you get product market fit early, you're going to be in great shape. Because if you get product market fit early, then you need to raise less capital and you own more of the cap table and you spend less time fundraising. People who don't have product market fit have to convince people create arguments as opposed to just showing their data and saying, talk to my top three customers. If your top three customers are over the moon, it's all going to work out. This weekend startups is brought to you by Squarespace. Turn your idea into a new website. Go to Squarespace.com slash Twist for a free trial. When you're ready to launch, use offer code twist to save 10% off your first purchase of a website or domain.

Fidelity Private Shares. If you want the all-in-one equity management platform, Fidelity Private Shares has you covered. Visit FidelityPrivate Shares.com. mention this podcast for 20% off your first year subscription. And Inbound. Connect with visionary leaders like Dario Amadeh and Amy Poehler at Inbound 2025, September 3rd through 5th in San Francisco, the epicenter of tech innovation and transform your business strategy for the AI era. Use code Twist 10 for 10% off your general admission ticket at Inbound.com slash register. Valid through July 31st.

All right, everybody, welcome back to this week in startups. I'm your host, Jason Calacanis with me, my co-host Alex, how are you, Alex? Happy Monday. I'm tremendous. I can't tell you how glad I am to be back at work. This was a busy weekend and nothing feels better than focus and time. Oh, very nice, very nice. I guess it's been a slow news week, so we'll see if we have anything on the docket that we can get to. I'm sure people have a lot of questions for me. Yeah, but first though, Jason, you're in LA. So we're coming here an hour later, but you wanted to talk a little bit about what you've been up to you with the family, he said. Oh, well, no, I was just telling you, I went directly from Singapore to Los

Angeles to do a quick Disney trip with the girls. That was quite nice. I got to do, I guess it's going to become a yearly tradition now to go there. And we had like, you know, the in-laws and, you know, friends from L.A. when we lived here. So we had 10 people. Oh, man. But we did this VIP tour thing again.

And oh, my Lord. So took a little of that speaking gig money and put it towards the VIP tour. My speaking fees in Singapore go directly to my Disney adventure. Yeah, it was it was quite nice to take a day off. And then, of course, my phone is blowing up because everybody's asking me, hey, where's the episode of the other podcast? And I was like, yeah, refer to my tweet. I'm taking a beat.

So we'll get to the news that we have in front of us here. There's so much going on. It's almost hard to process it. I see we have a lot going on in the venture space. And then a lot of people. talking about early state startups and their valuations, which people listening to this week and startups are going to obviously really care about. I know we're going to do an office hours at the end here. But I had a great trip to Singapore. I don't know if we like recap the trip at all.

We talked about the tokenization of venture funds last Friday, but we, uh, we had a short timeframe because of, uh, housekeeping, if I recall correctly. Oh, yeah, housekeeping kept knocking on my door, uh, at the hotel. I was at when I first landed here. Well, my, my jet lag's good now. I'm sleeping. I've been trying out this whoop. The founder of whoop sent me the whoop five. Very interesting device, by the way. Now, I got comped out on it, so it's not like I paid for this. So take the review for what it's worth full disclosure, my little journalistic ethics. But it's actually kind of like an addicting device because it gives you like your stress, your energy, like your preparedness. It's much better than the Apple Watches native software,

obviously. But I kind of like my eight sleep sleep data a little bit better. But overall, a bit addicting and I'm starting to see a double-fisted friend. When I was in Singapore, you know, people there are pretty affluent, right? It's kind of like a Hong Kong, New York, London scene. So people are paying a decent amount for rent. And if you're there, you're probably making a pretty penny. And there's zero capital gains tax in Singapore, by the way. So if you, if you were running an venture for real estate. I mean, whoa. They were talking about that. I was like, Wait, I'm sorry, one more time? Zero percent, is that what you said?

Zero percent capital games is what I was told. I looked that up. It seems to be the case. I think that's why I like one of the Facebook co-founders, Eduardo. Yeah, Savron. Savarin lives there supposedly. Maybe he wanted to take a different route. He's been there for a long time, maybe 15 years.

I don't know when the Facebook IPO was. Yeah. It's a pay an exit tax. So when you leave the United States, they make you settle up as it were. So if you had $10 million in Facebook shares and you went to Singapore, as I met somebody who was there, who had just given up their citizenship. And so, you know, the other thing when I was in Singapore, this super interesting, Alex, is I was talking to a lot of parents. Now, these are people who are in typically mixed race or multi-ethnicity, multiple, what would be the way to say it? I mean, a lot of people in single, multiple nationalities, perfect, but also mixed race, whatever.

So multiple nationality couples. So, you know, one person's from America, but lived in Dubai, was educated in London, and now lives in Singapore. Another person's from New Zealand, but grew up in Japan and China and now lives in Singapore. Like, these are the 1% of the 1% of elites who travel the world doing commerce, they're their children. Unlimited money, resources, and ability to move around the planet and live where they want to. And, you know, multiple passport holder type people, right? Yep. Their kids, they were saying don't want to come to America for school. They're concerned.

One of them was concerned, and their kids were in school and the talk in their class was, hey, maybe we don't leave the country, America, to go on spring break or go see our parents over. Christmas because what if we can't get back in? Yep. Maybe the parents have to come see them, you know, in Boston at Harvard or something because they're afraid they're not going to get back in. So it's like a real palatable frustration, fear, and even maybe on the margin, it's a little bit of anger or disappointment. And then on the trade basis, not understanding what's going to happen with trade for

their businesses and that their businesses are looking at other options for trade partner. So I was, you know, sort of really taking pause. on that because as somebody who travels the world on a regular basis when I was in Dubai, Doha, Riyadh, Japan over the, you know, previous five years, it was always, oh, you're American. Oh, that's amazing. My daughter's going to school, you know, in Berkeley or, oh, my son is going to go, is there on vacation and he wants to go be a ski instructor in Tahoe. Like, these are the conversations that were happening just, you know, the last five years, not the last five months. So there's something definitely happening in that regard. But the reason this, you know, sort of applies to

startups, I think, is a lot of these startups are going to not come to the U.S. They're deciding to go to Dubai or Riyadh or Singapore or Australia or stay in Europe or whatever, but generally going to really super friendly places to business that, and still attacking the U.S. market, right, still going after U.S. customers, but just from a different HQ, which means different investors, which means different employee bases, not being based in the U.S. I just look at that and I was like, hmm, I need to bring founder university or startup program to Singapore or Japan and the Middle East and maybe start capturing. some of this energy if we're going to balkanize the startup communities and people are not going to come to the U.S., the best and brightest talent, maybe it's time to create funds with foreign LPs, with foreign structures, foreign tax brackets, et cetera, and just domicile that. And then I just started thinking about that. And I was like, wait a second. I'm not going to pop myself up here, but I'm a modest player in the startup ecosystem.

And I'm thinking, you know, I fund 100 companies a year, 50 of them wind up, 60 of them wind up, less 60 of them wind up going on to get more funding. So, you know, you know, some of these companies, two of the companies I think are in the S&P 500. I think are in the S&P 500. I think Robin Hood's about to be put in the S&P 500. So two of my first hundred. Bad news. It didn't get put in and its stock went down and everyone's very sad. Okay. So it was on the bubble. But anyway, you know. Right there. Right there. Right there, right? So, I mean, I'll probably have two of my companies in my first hundred bets being the S&P 500, Robin Hood and Uber. That's kind of mind-blowing. Maybe I'll do that again. You know,

maybe in the next 100, I'll hit another two. Who knows? It's anything's possible. Well, Jason, we all know you do need more money. I think about you every day and I think to myself, Jason, Jason, Calacanis, he's just running out. Yeah. So anyway, what I just came to this conclusion of is there's a large number of depocketed individuals outside. the world and future depocketed individuals who are just not interested in America anymore. And that made me sad. All right, founders. Let's talk about your website. I know. Disgratziad. You're ashamed of your website. I know. Well, it's time to clean it up. Give your brand a quick refresh with Squarespace.

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Once again, Squarespace.com slash twist. And then I thought, wait a second, I'm talking about spending whatever energy I have left as, you know, in the third act of my career and, and likely final, you know, see what happens with life extension. But, you know, if I'm in my third act here and it's going to be the last act of me, you know, in terms of professionally, I'm actually thinking like maybe I spend half my time on things outside the U.S. This should be concerning to folks. And it was certainly concerning to me. So I'm just putting that out there.

I'm going to write a blog post about it on my substack and just, but I think the opportunity means there's going to be a lot of opportunity for founders who, if you're not getting funded in the U.S., I think you can get funded quickly in Dubai, Riyadh, Doa, Singapore. or, you know, Australia. Like, maybe there's other startup markets if you could equally get funded as you might in San Francisco. I want to stay on this theme, though, because this actually dovetails well with both the YC conversation we're going to have, given its centrality in the San Francisco, therefore, U.S. market,

Jason. But just before we get into that, I want to point out that the discussion about people staying in their home markets and not coming to the United States to do business and so forth is not idle. It's happening now to some degree. So Mistral is a French foundational AI model company. We've talked about them on the show a couple of times, part of the Tweth 500, and they've made a number of pretty cool agents and apps and so forth. Anyways, the reason why I have them on the docket today is that according to, I think it's the FT,

Mestral has, quote, secured new contracts worth hundreds of millions of dollars, and that's going to help it raise probably about another billion dollars this year. What are these deals? Well, they're multi-year agreements with what I can tell is mostly European companies. So here we are seeing kind of the leading sovereign EU AI player absorb quite a lot of local business because back to your point, I don't think the United States and U.S. companies and U.S. technologies have the same trustability, you might say, as they did six, 12 months ago. Now, in this case, it's helping this company grow that we care about, but those contracts could have gone to probably an American company two years ago. Yeah, they're not a major player. There's some protectionism, I guess. in Europe and the people want to use the local homegrown product. It doesn't make sense to me that, you know, these customers would use what is probably an inferior product, not the most competitive product.

So I wonder what's going on there, right? Or maybe people are just testing it, but they only have a hundred million worth of revenue, Mishrel. Yeah. Is that correct here? They're supposed to get to about $100 million this year, yeah. or supposed to get to 100. So looking at that, combining it with the breaking news about opening eye hitting 100 times that,

I think that kind of tells the story maybe, which is the people who are using Mistrel and they secure all these new contracts worth hundreds of millions of dollars. It's probably people sampling it and they could cancel it. So, you know, when you see hundreds of millions of dollars in contracts, always as journalists or as an insider, former journalist, You would look at it and say, you know what, that might be a five-year deal that goes for, you know, five to 10 to 20 to 40 to 80. Or maybe they made the estimates of what those contracts are worth.

So you have to take it with a, I don't want to say a grain of salt, but in context to this isn't going to the bottom line this year, perhaps. If they said they have hundreds of millions, it's 100 millions going to come in here. That might make sense. The company, though, really agrees with you. They said that, quote, sovereignty is not our core business. But the company did say that in the last 100 days, it tripled and in particular in Europe and outside of the U.S. So they're trying to be not the EU's protectionist like welfare beneficiary. They're trying to be a global competitor with open source models and agents.

I just think that there's a seen a lot of local demand because people have a little bit more faith and trust in them than perhaps a Microsoft or something similar. So I think they're playing it straight. But I do agree, though, Jason, we need to be cautious about these long-term bookings because I don't know. If a company came to you and said, we have a five-year contract, how many years of that are you going to give them credit for today? Two? Probably? I guess you'd have to look at the details on the contract

and what the cancellation is. Most of these things have a three to six month out. So with three months notice or six months notice, you can cancel the contract. None of them would ever be locked in. I wonder if even an Nvidia contract for the most sought-after product in the world right now, like H-100s, would those even be guaranteed? or not.

Like, maybe you have, you know, till three months out to cancel it. Like, so when you order a car, you know, there's a point at which you can't return it or you order a hotel room's point in which you can't return it. In business, I would say it's usually a yearly contract. You get a discount for doing the year. You can cancel with three months notice or six months notice within that year. So if you got to month six and you decided to cancel you early as you could get out as month nine or month 12, in which case you're just going to use it for the rest of the year.

the year. But it is interesting that they're saying people are looking to them because they don't want a U.S. product. That's kind of what they're saying, is they're getting an uptick and European folks who want it? Yeah, a nice tailwind, if you will, but they still want to compete and sell everywhere. I mean, if they're going after the foundational market space, it does seem like that is becoming quickly commoditized, indistinguishable. You know, they're kind of all leaprogging us. When you look at the polymarket for who's, going to have the best model, which we could pull up right now. I notice it keeps changing. So, you know, Open AI and I think Open AI and Google Gem and I keep going back and forth as the

most expected best model on the benchmarks. And so here we have. This is the which company has the best AI model at the end of 2025. Jason, I picked the furthest time frame that I could see. This market has about $900,000 in volume, so not the most, but not. zero and wow, Google has a 51% chance right now. Open AI is in second place, XAI, 16%, Anthropic 8%, and no, Mistralves not even make the betting, but Alibaba, Medved and Deepseek all get a couple of points each. So there you go. So this is like very interesting to look at it because the people who would participate in that kind of a market are people with an ed.

It's one of the things I love about Polly Market. Shout out to my friends of Polymarket. They are capturing that 900,000 are people who are deep insiders on betting. People who really are either working on the models, work with the models, you know, some developer in Ukraine who's looking at it going, you know what? Some developer in Sydney who's looking at it going, you know what? I think based on my firsthand knowledge it's going to be, either Gemini or OpenAI.

I use this stuff every day and I know their release schedule. I mean, this is by the end of 25. Somebody might even know the release schedules, right? And so that's why this is so valuable to look at. It's either going to be one of those two companies, 85%, I think, if you put the first two together, something like that. Was it 84? 74.

Oh, 74 put together. So, you know, and then XAI right behind them in third place. So you put those three together. Now you're looking at 80. 90. So it's like, it's a three horse race right now. Mistral's not in it currently. Even Meta's not in it.

That's fascinating, too, with all the open source. Mistral does a lot of open source work too. And so we're actually seeing Jason, Mistral and Meta, the two open source kind of what I would call leading lights, apart from anything coming out of China, really not perform as well as we might have expected. Because if you think about what we were saying six months ago, we were saying, you know, maybe this open source stuff is going to be the winners. and doesn't seem to be the case yet, at least.

I'm a little surprised. It would make sense that the closed products with lots of backing, those three have the most backing, and the most hardware would do the best. The open source ones don't have as much iron. It's an exception of meta, but even meta, I think it's behind on iron. And they're open source, so they go slow to go fast.

Slow is smooth, smooth is fast. I think that's it. Marines or something when they're cleaning their guns are, yeah, whacking Osama bin Laden. So, interesting. I'm interested to see when people start betting on an open source model to win the day. This advertisement is paid by Fidelity Private Shares. All right, founders, we all know. Tap tables, due diligence, and of course, managing investors is a huge headache. But there's a very simple solution for you. Today we're talking with Kristen Kraft, an old friend of mine, and she works at Fidelity Private Chairs, a new group over at Fidelity. You've heard of Fidelity before. And they have a

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They'll give you 20% off your first year subscription. Once again, FidelityPrivate shares.com and tell them that you heard about it here on this weekend startups. Yeah, we'll see. In the meantime, the corollary to the story, everybody, is that Open AI about 45 minutes ago announced via C and BC that they have reached the 10 billion ARR threshold. Jason, I'm not going to lie. I did not think that OpenAI, best known for a course for chat GPT and the O series of reasoning models was going to be this big, this fast. I knew it was growing quickly, but I didn't expect this data point for everybody. 3.7 billion in revenue last year. Jason, of course, that would put them at a higher ARR number at the end of 2024, but did you expect to see 10 billion this soon? No. No. And I'm wondering how much of it is enterprise versus consumers. That's like kind of the key here is how much of it is people

just, you know, startups who are raising a bunch of money, big companies, throwing jobs at it, or the second pillar of their stool, which is consumer subscriptions. We did have that information previously from last year. So do you have it handy by chance? Is it 50-50? Is it 70-30? I don't have that exact split, but I do have the most recent business announcement from them is that they went from 2 million paying business subscribers in February to 3 million.

I think it was last week. 3 million, and business people pay 40 bucks a month or something? It's 120 million a month. At a minimum. So that would be 1.4? 1.4 billion? Yeah. I will say though,

CNBC did add that the 10 billion ARR figure, according to OpenAI, includes consumer, CHAPT, business products, and its API, but does not include licensing revenue from Microsoft and large one-time deals,

which makes sense, as it's an ARR number, but I do like they gave that clarification. We can mostly trust that this is a reasonable annual recurring revenue figure versus just kind of a run rate statistic. I like that. Yeah, it's pretty impressive. I do think we're going to see the consumer products are going to be free.

I think that the idea that consumers are going to pay for this, that could be a short-term thing. People used to pay for the Netscape browser. They don't pay for their browser anymore. So I don't think subscription revenue will be a thing. I think subscription revenue is a thing right now because these are expensive products to run, to operate. But as they get cheaper to operate, there's no reason Apple, Google,

or Facebook would ever charge for them. They'll just include them in their free product. So then what does the pro get you? Like it might be the pro is kind of like getting extra storage, from iCloud. The pro could be, I don't know, having your badge on Twitter X.

I'm not sure what the pro version of all this is, but I think you're going to get 99 of 100 queries that'll be capable of being done by a free service that's advertising based, which could be the third leg of the stool.

I wouldn't be surprised if in the next year or two, Sam Waltman says, we now have an advertising product. You put in your URL, you put in what your product's about, and we present it to users and you pay us a dollar, cost per click,

and it's just integrated into the text. If you use the free product, you have to see an ad before you use it. You have to watch a video before you use it. Or on the sidebar, there's links, or in between your answer, there's links. You have to click a link to see an interstitial and then you get your result.

Yeah, actually, that would work. I just figured out the new model. While you're waiting for your result, you have to wait 15 seconds or 10 seconds. You have to watch a video commercial, commercial while your results doing and just like the five second skip, that would be the perfect model for a free version of chat chippy too. Just enough friction to make you pay if you want or just enough friction to monetize with it being advertisement. But not so much that it ruins the

experience. I dig it. And backing up your thought there, Jason, don't forget they hired Fiji, the former CEO of Instacart. She is previously not only of Instagram, but also of Meta, which makes his money off advertising. And under her tenure, Instacart made a lot of money off advertising inside of its application. So quite a lot of bona fides there on that front. I found the number, by the way, 75% of Open AI's revenue last year was thought to be consumer. That's an extrapolated stat, not a hard one from the company.

But even if it's directionally accurate, I think it's fair to say that the company is still a majority consumer business, which I think makes the revenue seem a little bit less solid, given what you're saying about the potential for disruption there. But at least for now, it's working. I could see, you know, like I was thinking the other day, like, how many of these things am I actually paying for? Maybe I need to cut a couple. Like if I'm paying 30 bucks a month for five of them, I think, I'm paying probably 1,800 a year. Sure, a business person is not a lot if you're, and for somebody who covers it as an investor, it's not a lot. But even I was thinking, like, maybe I'll cut the bottom two. Do I need to have that? Or maybe I'll get a backup account that I share with the entire team on one common email address, you know, so we can sample it once in a while.

What's going on with the venture fund slowing their pace? Because I think this is also kind of an interesting trend if we're going to get into it. And I think Wednesday we're going to have our first VC roundtable on the show. Is that right? We are. I'm starting to work on that actually right after this show. We're going to get the outline pulled together. So everyone expect a fun episode on Wednesday.

Okay. So venture fund investing pace. Here we are talking about a chart shared by Megan Reynolds. Regular viewers of the show, Jason will recall that she came to the 2024 liquidity summit. We shared her talk in episode 2008, if you want to go hear how she discusses the LP side of relationships in the venture game, and that's because she leads both talent and capital formation over at Altimeter. All right, all that said, she shared a very interesting chart showing the time between funds. And you're going to pull up this chart here, Jason, and just give everyone a quick overview if they're on the audio.

It's a time series chart tracking data from 2005 to 2024, and it shows. how many months between funds from the same firm. And it gives a middle of 50% interval and then also a median number. And it breaks this data into three categories, the kind of like olden days from 2005 to 2013, then the acceleration through COVID, which was 2014 through 2022, and then the last couple of years. And just to kick you off here, Jason, I ran all these numbers into a sheet. And the average for the first era was a 45-month.

gap between funds, then that fell to a 29 month gap in the accelerated COVID-era ZERP period, and then most recently, it's come back up to 31.5. I'm curious what you see in this data. It's fascinating. I think people used to raise a fund, and they were methodical deploying it over three or four years from 2005, 2005 all the way to, it looks like, sorry, the church just went off the screen. I was, don't worry about it. I have the chart on my notes here. So just looking at it in my notes here, if you look at, or maybe leave it up so the audience can see as I sort of sports cast it. But if you look from 2005 all the way to 2014, that goes through the great financial crisis, right? And right up until things started to boom. And you have the average. I'm looking at the average dots, which are in the middle. And it starts in 2005 with, 49 months to deploy a fund, right? That's after the dot-com bust.

And then we see 52, 36, 42, 41, 46, 47, 45, 48, and then all of a sudden, a sudden drop to 36 months to deploy a fund in 2014. So that's an interesting 10-year cycle there of where people were taking, you know, 40-some-odd months, three and a half, four years. I've always thought three years of primary investing was the right timing between funds, maybe four. Then we get into sort of ZERP. It's getting really hot in here kind of era.

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there was a 20 month. And in, yeah, 20, if you look at 2020, 2020, 2021, 2022, that kind of tells the story. 23, 24, and 20 months between raising funds. You've got numbered sequential funds, that's wild. Matt's wild. That means you were going back to your LPs every, you know, two and a half, three years. It's just crazy. And now we're back up to 34, it looks like. So reversion to the meme, mean, or the meme, reversion to the meme.

But yeah, ZERP was not thoughtful. And then what happens is there's a very practical thing that happens here, Alex. if you concentrate all your bets in a two-year period versus a three or even better four-year period, if it take four years, then if there was a boom or a bust that happened, you might have two years a boom, like peak zirp, and then two years in the trial.

Or you might have just rid the last four years of the boom up, but at least the first two years might not be what would have been as unreasonable, right? or you could have gotten lucky all four years are deployed at the bottom of the market like we are, I think, over the last year or two, and then boom, it all comes back and you're a hero. or the 2009, 10, 11, 12, 13, 14 vintages that were just Airbnbs, Coinbases, Uber's, etc., lots of juicy stuff in there.

The compressed time frame then just really makes your venture funds bets incredibly concentrated on a time basis, which is worrying to me. But I want to go back to the 2014 points. We saw a pretty rapid shift from a 48-month median deployment time to 36. That's a 25% decline in one year. And honestly, 2014 kind of to me is to start of the unicorn era. Companies staying private longer, raising more money. And so I wonder if some of the decline in time between funds was simply the ability of firms

to write larger checks that were growing faster than their proximate funds were. So let's say you can write $100 billion check instead of $50. that's 2x, but if you're funding that goes up by 30%, you know, incrementally from one, fund two, fund three, you could end up burning through your fund faster. And that can work well if it's all going into Coinbase or it can go pretty poorly if it's all going into WeWork. So I'm curious to see what the new normal will be. I don't think we're going back to 52 months like we saw in 2006, though.

So for founders, though, Jason, we are seeing funds take a little bit longer to invest. I'm curious, what does this mean for on the ground folks? if you're out there raising a pre-seed Cedar series A, how should this change or just impact your thinking about how you approach the capital markets? You know, a lot of times founders, I find, get too obsessive with the market conditions and what's going on in VC land. And they tend to start blaming the VCs as opposed to looking at what they're doing. And that is reasonable.

If you're not having people throw money at you, you're probably like, well, the VCs just don't understand. It's like somebody who writes a great screenplay and is a director and you're quitting Tarantino and nobody will make your movie. And then you're like, you know what? I'm going to put Pulp Fiction and true romance aside. I'm going to work on this little more narrow than reservoir dogs and I'll prove it. You got to do your reservoir dog. It's up to you as a founder to get that prototype built in today's market. In the vibe coding 25, the roaring vibe coding 20s, you kind of got to get your product to market. You kind of got to get to 5K a month in revenue. You kind of got to get to 10.000. 10 customers giving you 500 bucks a month or 100 giving you 100, whatever it is.

And I have two or three people, you know, grinding on it. Based on sweat equity, there's very few J-CALs and Y combinators out there taking flyers on teams. I'll just be totally honest about it. Everybody's waiting to see who hits a million, two, or three million in revenue. Nobody wants to do the hard work of, you know, I write, I think our firm is writing 60-25K checks this year and maybe, be 30, 125K checks and we'll do 10,

you know, 250KC check, something in that range. And so you start doing the math on that, like most people don't want to bother running an accelerator or a pre-accelerator

that gives you your first friends and family check because it's hard. Really hard. Other than that, why not? It creates a lot of work. Yeah. Well, if you're,

if you have a pool of capital, what's a better life? If you're trying to do a lifestyle and maybe you just ask your friends, what are you investing in? And can I put 250, 500K into what you're investing in? And so for founders, just know where you're at. If you got the first 500K check from a seed fund, the other two 250K checks are going to quickly follow because you got that person as an anchor. And they've got conviction and you've got, in that case, 250K in revenue, 500K in

revenue. And they're just going to, you know, zip, zip. If you're before that and you're trying to pitch those same group of people, you're probably not going to get them unless you're a second time entrepreneur. So then you have to get the customer. So focus relentlessly on customer, product market fit. It'll all work out. And if it doesn't work out on this startup and you run out of cash and you don't get product market fit, well, then you're going to be better the second time around. And you'll you'll be able to get product market fit faster with less resources. And that's the key. Can you get product market fit, how fast and for how little money and overhead can you get to product market

fit? Okay. We're doing this a little out of the order I had in mind, but that's too good of a corollary to bring up the data from Andreessen's. We just can't pass it up. So, Drewson Horowitz, dropped some data looking at companies both in their portfolio and companies that they had seen and gotten enough information from to include inside of their kind of bucket of data, if you will. This is all anonymized, but we're talking about the path to Series A, Jason, and we're trying to figure out the revenue benchmarks for high quality, if you will, for both enterprise and consumer AI startups. Now, this is under the umbrella of our startup growing faster today than ever before, and I think also to your point about why a lot of investors want to see some traction, because

companies are growing so quickly, why not wait for some. So here's a bit of data from Andreessen about revenue benchmarks for enterprise gen AI startups. And just sports casting folks out there, this shows three different quintiles, core tiles, the bottom, the median, and then the top. And it shows revenue growth at six months after monetization and 12 months. So if you're a median enterprise gen AI startup after six months, Jason, of selling your product,

you have about 700,000 worth of ARR and at month 12, 2.1. At the top quartile, it's 2 million ARR at six months and 5.3 million at the 12 month point. And if you are in that top quartile, you raise your Series A just seven months after your seed round. Okay, so let's pause there before we get to the amount they raised afterwards. So getting to 500, 700 or 2 million in revenue in just six months is absolutely fantastic. So anybody who does that is a winner. So this data is a subset already. These are people who got to revenue.

Remember, probably 80% of startups never get to revenue. And I would say 90% of startups never get to 500K in revenue. So this is like literally the top 10% or 5% of startups, you know, coming out of Y Combinator, launch accelerator, tech stars, et cetera, antler. So the bottom quartile here is in fact like the 90th quartile, the 90th percentile in startup land. So just so we don't neg them. So, yes, good point, Chisholm. Yeah, because this is, and as you can see,

one, the bottom group goes two and a half, just over, yeah, two and a quarter or two and a half, two and a half times in from six to 12 months. So they're growing at a nice pace. The point seven triples to 2.1 and the two million, two and a half to five point three. In other words, they grow their revenue pretty briskly between that six and 12-month period, which is indicative of product market fit. And we just talked about.

The first six months, you get product market fit, but it's light, it's loose, and then something happens between months six and 12. And that's not month six or 12 of the startup. That's month six after launching. So let's assume they spent a year in the lab with unpaid priles, going through an incubator. So this would be month 18 and month 24 is probably from the incorporation date or when they started writing code and doing customer research is probably what we're looking at here. It might even be like 18 months in the lab with free customers, etc. So it might even be 24 and 30 months. Something in that range is what we're talking about here.

But these things are growing quickly. And Indrisen has made a bucket of people who are in the top 10%. what's very interesting here is the time to series A. I think you would agree is that if you're a fast-growing startup, that top quartile raises their series A in seven months after launching revenue. So about seven months and they launched in month 18 or 12, you know, they're getting that series A, you know, by year, end of year two. Very impressive.

And then 13 months from the bottom in nine films. It's very interesting, yeah. The thing that really struck me, though, Jason, if you look at this chart, and I'll take it down in a second, but it shows how much money they raised these companies before their Series A. And there's an inverse correlation between pace of growth and time to Series A and capital raised. So the companies that grew the fastest and raised the most quickly, reaching that series A milestone, raised in this dataset, 2.3 million, 4 million for the median and 5.5 million for the bottom quartile. Essentially, the companies that are raising the least are growing the fastest, which surprised me, because frankly, there's money is useful. Okay, tell me why. It doesn't surprise me.

Having less resources makes you scrappier, and they needed less resources. So they spent less time raising money because they were making more from customers. So that's the best part of the data. That last column is the best part of the data. Everything, you know, is like as expected for me. the last row is super confirming of a trend that I was monitoring and talking about for the past year or two, which is the breakout companies now that really figure out revenue are raising much less, and they don't need to raise as much. And this confirms that. Now, I don't know if this is based on 10 companies or 100.

It would be really nice to know the denominator here and how they got you. I think they're trying to be a little bit aloof from the data so they can share it. So important data here for entrepreneurs to consider the most important things here are that if you get product market fit early, you're going to be in great shape. Because if you get product market fit early, then you need to raise less capital and you own more of the cap table and you spend less time fundraising. People who don't have product market fit have to convince people create arguments as opposed to just showing their data and saying, talk to my top three customers. If your top three customers are over the moon, it's all going to work out. Before we go to the customer, let's just do the YC thing real quick. Ah, yes, let's do that.

Because that's the kind of button on all of this. Yes, we actually had a really great kind of coordinated link of data points today. All right. So Nicole Wiskoff from Wiscoff Ventures. Yeah. Posted some very interesting data over on the Twitters. And Gary Tan did respond. We have quite a lot to discuss here, Jason.

But here is the data she put out. She grabbed some data from the Y Combinator Spring 2025 batch, and then she looked at a number of non-YC pre-edency companies from around the same era, and she found that from the YC cohort, the average round size, 3 million, average cap on their safe notes was about $25 million, and their average ARR just over 100K. For non-YC precedency companies at around the same time, average round size, 2.4 million, smaller,

average valuation cap on their safe, 15 million, much lower, and their average ARR was $290,000, much more. There's a lot of nuance to this data, Jason, but did any of that surprise you when you saw it? No, not at all. What Wycombinator has done is what Harvard has done. They've created incredible brand that people are willing to pay for value or proceed value.

You can make a big debate there. This data, of course, is probably friends. It follows the absolute trend. which is non-YC companies with traction versus YC companies with traction, you're going to get essentially here half the price for triple the performance, which is 6x leverage. But let's just call a 5x leverage on every dollar invested. This is why a lot of folks have opted out of the YC game because there are a lot of dentists

and a lot of folks coming to Y Combinator Demo Day who are, you know, maybe not as entry price discerning. And the majority of unicorns in Silicon Valley did not go to Y Combinator. They didn't get backed by Sequoia and they didn't get backed by me. That's just the nature of how big our market is. So going and I would say a percentage of Y Combinator companies I know historically don't clear market. So they try for $25 million on the valuation cap. But Nicole might never meet them because they give up trying to raise money or they raise a small amount.

had a smaller valuation and, you know, they don't make their way to the seed funds. In other words, this data is kind of skimming the cream of two different groups, I think. So let's put that in there. Just like the Andreessen data, we were just discussing. We're talking about companies that Andreessen cared about or invested in. So we're already looking at a pretty rarefied circle. Yeah. So I think, and if Wycombinator accepts 1% of startups and companies that get to 25K a month

in revenue, I would say, you know, you know, in the non-YC-Precied and seed cos, that would equal 1% of startups that were formed, you know, in the United States. So this data is about the 1% of startups in the seed ecosystem. And it is correct. You will pay 5X net net on the valuation

to the ARR performance. Now, but, you know, listen, there's Airbnb, he went to Y Combinator. So people are hoping of the 500 companies, or I'm not sure how many they're doing a year now. Maybe it's- There are cohorts have gotten smaller again. So, okay, so there's three cohorts now instead of two, I think.

And I think they're doing 250 per or 200 per. So if they're doing 250 per and they're doing three, that's 750. So it was at 500. It would be good to know that number because for Y-combinator, or TechStars or us, we're doing a large amount of bets. knowing that our pull-through rate is going to be 50%, 60%, 70%, I bet of YC companies maybe 60%, 70%, 70%, actually wind up raising around. That statistic is the one you really need to look at.

What this means is if you get accepted to Y Combinator, go. If you get accepted to launch, go. If you get accepted to Foundryversity, go. Ampler, tech stars. I don't know the other top accelerators out there. I suppose it's probably steep drop off from there. But if you can get into one of these programs, they act as a filtering mechanism for people like Nicole. People like Nicole do not have a big enough staff to sort through the 20,000 applications.

We get the 50,000 that Y Combinator gets, the 40,000 that Techstar gets, Antler probably gets 40,000 or 30,000. It's just too much work to get through all those. So what you're looking for as a seed manager or a pre-seed fund is for somebody to just weed out people who can't show up for 12 weeks in a row to an accelerator and have three co-founders, one of which is a developer submitting code who owns over 10% of the equity on the cap table. That's what we do at our accelerator

or at Founding University or YC or TechStars. That's what we all do. We curate a group of apples, picked from the same orchard that aren't bruised, that are shiny and new, and don't have worms, them and we put them out, you know, and say, hey, look, we worked with these apples. These are, these are some good apples. How about these apples? Um, but if you were a, if you were

a venture capitalist, the best thing to do is to not, is to go to demo day, collect all the information, do all the meetings and then wait one year to then go and meet with your favorite companies. Um, because I guarantee you, if you're raising a $25 million dollar valuation caps, if this data is directionally correct, and I believe it to be, with 100 in ARR, it's 250 times revenue, right? So if you wait one year, that company will have spent that $3 million,

or much of it, they'll have gotten to $300K in revenue. And if they do a $25 million around, now they're still at 100 times or 90 times revenue, which is still extraordinary. And you can make the same bet with three or four times, the revenue. So stay in touch with the company, et cetera. I would,

and these companies will get funded, so just pause and then do the funding after is my best bet. I think that's the best advice. I agree with that from the venture perspective. I do want to say that Gary Tan, I want to give him his words here. He had a couple different notes, but

one of he says that the vast majority of YC startups start with just an idea or with no revenue, meaning that they are younger at Demo Day age and the other startups raising similar rounds. So he thinks that the ARR comparisons that Nicole put up are a little bit specious. But we're always talking about in private markets, incomplete data. And so we're always doing our best. I don't think she's being at all malicious. I think Gary has a reasonable point. But no matter how you slice it, you're still paying quite a lot for not a lot of revenue. And just if you want to

hear more from Nicole Wiskoff episode 2016, we had her on the show. She's a great interview. I would say his response about don't worry about YC 7% equity take is a good comment. I tell people this about our accelerator or YC. And now if it was 10% or 15%, I would be a little bit worried because that's a large number. But any of these programs, that 7% gets made up for in the valuation you get if you go raise money after, whether it's our program or his program or any program. And the AR comparison, you know, know that, you know, the vast majority of YC startups are just an idea with no revenue. Just an idea with no revenue. Twenty-five million is a pretty crazy valuation to ask for for just an idea

with no revenue. So I think that doesn't make a lot of sense. These results on the best in class for the companies. That's TVPI. So I would ignore this because that's paper gains, not DPI. I'm pulling this up for you right now, Jason. I just had to make it make it big. Yeah. So here we go. I'm not sure who made this chart, but maybe it's Carta, it's Carta data maybe.

Yeah, this is not a good chart to go on because this is just paper gains and we just establish that YC get you a higher evaluation that is outside to Garra's own admission. Like, don't worry about the 7% because we're going to get you a higher evaluation. Then that means the valuations are in full. because of the white combinator reputation and justly so, because they have a great reputation, and they run a great program, what that means is the paper gains are not what you should be looking at when making a decision and evaluating them. You should be looking at the DPI and the distributions that actually got generated. Paper gains are inflated here by Gary Tan's own admission. He's saying come to YC because we're going to get you a much higher valuation, five times more than a non-YC. startup. If that actually is true, then these numbers based on TVPI would need to be divided by five or divided by three or something. And then you would be looking at much different numbers. And actually, I think if you did that, the top 10% being 3x, that might actually be the actual

correct number. Three X is great for a fund. Okay. 3x is great for a fund. All right. Now, Jason, I do want to get to our office hours today. We're getting back into this now that you're no longer over in Singapore. And so today, we have Sean Stigarwald from Customer IQ. They were in Founder University cohort eight. They are on launch, Accelerator cohort 34. Please welcome Sean to the show. Sean, hey.

Oh, my gosh. Hey, hey. You've got too much hair. Just for starters. How dare you, sir? You look great. All right. So tell everybody what customer IQ does and how it's going.

Yeah, definitely. So we work with revenue teams to expand their capacity by automating email and CRM data entry. And it's going well. Most people hate both of those things, so they love when we solve them. Who would be the ideal customer for your startup, the ICP, as we say in the business,

ideal customer profile? Yeah, ideally it's teams with large sales teams, and they send a lot of quotes. So they have a ton of action going on in their inbox. It's really important for them to get them out quickly, respond to people quickly and then follow up. And those are three things that our agent helps a ton with. Are people, if I'm, you know, explaining the product correctly,

are people cool with automated communications with customers? Or do they like to have the AI kind of queue up the communications and tell you like, hey, this might be a good thing to send to that customer you signed six months ago and haven't spoken to since? Yeah, great question. So we never send without the user reviewing. It's all drafts. So what they love is that it's in the inbox. And that's one of the unique things that we do. So we integrate directly with Gmail and Outlook. And for example, like my favorite part every morning, you get an email from Quinn is the name of the agent and says, hey, you sent 14 emails over the last few days where we expected a response. And we didn't get one. So I left these drafts in the drafts folder. And they just flip over to the drafts and they go through and they review them. And as they send them out, it gets better. But it's never sending, as they make edits, it gets better. But it's never sending on their behalf.

So I pay for superhuman. Superhuman is doing drafts for me. Why would I use customer IQ if superhuman's doing that already? What's the difference between the two products? Now, I know the answer to this, but I'm giving you softball. Just teed enough. Yeah, sure. Teat enough for you.

Superhuman phenomenal if you're an email power user. And it's just like such a thoughtful interface over the email. We build an agent that lives in the inbox. So all of our users, they're either committed to or just still using like Gmail or Outlook, the actual interface. Nothing about that changes. They keep using the same way. And then we're focused on revenue teams, which is sales and customer success. So what we build might not end up making as much sense to maybe support or product management or some of these other roles in the companies that we work with.

Got it. And you kind of see that reflected in a bunch of different features that we, You also have access to some unique data when you're drafting your emails, correct? Exactly. Yeah. So the two-pronged approach of integrating with the CRM and automating all that data in there means we have just amazing context of what should be written here, like what good looks like data that performs well in deals. And that kind of keeps expanding. And as the models get better, the context is the most important thing. So we help them automate a bunch of the busy work and what data gets put into that system. But. in actual, like the actionable bits that the agent does in drafting, we can use that to do it even better. So if I have somebody in my Salesforce or my HubSpot, you're using that as part of the drafts, yeah? Yeah. Just imagine like in Salesforce or HubSpot, a contact or an account record. Ultimately, those are like profiles of people that you're speaking to. And when you go to write emails

or reach out or follow up or you work some sales process, that profile really informs everything. And the models have this incredible intelligence and ability to write just like you and solve that blank page problem. But those profiles give it all the context. And so yeah, that's what we use. Sean, I want to ask about the contextual AI engine that kind of underpins Quinn. Is this a model you guys change yourself? Is it a model you've built on top of?

Curious about that. And then also just data privacy because if you're inside of my email, you're inside of the absolute most critical information in my business. So how do you guys handle bringing in context to do this? work without sacrificing some privacy for the user? Yeah, the context is really everything. And that engine we described is really like a really imprecate rag format. They are just the system that we've created.

It's a retrieval augmented generation. It's when we know we have a task to do and we need the LOM to go do it, what information can we pull in from those CRM profiles or past conversations, like little nuggets that have been saved along the way to make that really, really good. And so, yeah, yeah, we, that's that content. sexual that we talk about. And it's what differentiates customer IQ from just out of the box using Gemini, for example, like in Gmail. If you ask it to write an email, most people have experienced this. It definitely writes an email for you, but it's not usually in your tone and style. It has no knowledge of

like this process or this deal. So do you guys host a, a, a, a model is internally on kind of on your own metal or are these the models that you're accessing via commercial APIs? Right now, it's commercial APIs as we, yeah, we're early stage. As we start bringing. on more and more larger customers, I definitely see a world where we are hosting open source models using that, and especially if those get better. The magic is really in the context, then that can be, yeah, that's, we, to answer your security question, like, that's the same software practices we've always used. In software development, yeah, we use AWS as our main backend, follow all, encrypted database practices, you go through talk to compliance audits, all of that.

Right. All right. So you went through Found University. You're in the accelerator now. or you're in the next flash. You're in the accelerator now. Yeah, we're in right now. Yeah. So that's great. We just had a whole conversation about, you know, year one startups and getting revenue. You've got customers.

You've got revenue. That's amazing. And you have questions for me. What's challenging? Any blockers? Any frustrations? Anything you need advice on? Yeah, definitely.

There's a couple things. One interesting, maybe even conversation to be had is we, this is my third company, third software company. First time ever in obviously an AI as most of what's usable today is pretty new. Yeah, pretty new. And one of like investor question we get and also just thing we think about every day is usage and like, you think about monthly active users is kind of a whole different world now where the vast majority of our users don't actually log in to customer IQ.

They sign up, they get set up initially, but then Quinn lives in their inbox and they kind of work alongside it every day. So I don't know if you, yeah, have any advice around just managing that or thinking about it. Yeah. So there's, there is a big question now. If companies are going to have less employees, then selling a per se basis that requires them to have less employees means you're empowering them to spend less money with you. Right. So let's let that sink in. If you do your job, then 10 salespeople could come down to six because they're sell or five, because you're selling twice as much because your product so damn. good. So you probably want to get some sort of a consumption or the amount of sales and how you

improve it metric, hard to do. I might be selling ads on a podcast and my book of business might be low millions of dollars. Alex might be selling, you know, HVAC solutions for, you know, campuses and the average sales might be a $10 million contract per year, and it's a three-year contract for $30 million. So how do you reconcile that, right? It's two different groups. Same type of person, but different ticket sizes, et cetera. So, you know, you have to find something that is going to like Salesforce. There's a third of people who will never use Salesforce because what is Salesforce course now?

Like $3,000 a person per year? I know there's a $500 a month per seat plan. So yeah, it's up there. Well, I mean, that's $6,000 a year per salesperson. That's why we don't use it. And so, like, doesn't make any sense. And it's also cumbersome and whatever. So you'll find who your ideal customer profile is, who wants to embrace this.

You come up with a price maybe for their activity and the number of users, the number of records in their CRM, maybe the number of active engaged customers. So the more they engage customers and the more the customers respond, the more you get paid. So if you are, in fact, helping somebody engage in more customers, maybe it's $500 a month. month plus, you know, $10 for every record in the CRM or every customer engaged. Or, you know, charging less than the value you provide is like one of the things startups do really well. So if Salesforce is $6,000, maybe we're charging, you know, $1,000 a year or $2,000 a year and maybe making it not necessary for them to have Salesforce.

So I would get audacious here and think, if this is how the future, of sales is this really thoughtful, you know, agent working with you. Maybe the agent is, you know, $50,000 a year. And either you want that agent in your 10 salespeople's email box or you don't. And you just go for the people who are selling those $30 million contracts, $10 million contract, seven-figure deals only, or six or seven-figure deals only. And anybody who's not selling six or seven-figure deals, like, you should not use this product. And you just go straight for high end and you help customize it for them and you give them a lot of attention. Or the other approach is you do what HubSpot did, which is it's very affordable. It's almost too affordable. It makes no sense

how cheap HubSpot is. So congratulations on the success. If people want to get in touch with you, what's your email in case investors, angels, seed funds, employee, potential team members, or most importantly, customers want to get a direct line to the CEO. What's his email? It's Sean at get customer IQ.com. So the get part important, but Sean, customer, yeah. Okay, Sean, I guess get customer IQ.com. Continued success and really, sky's the limit. I'm so excited that you went to Founder University and the accelerator.

I think it's like becoming a big pattern that we see people, Alex, over 12 weeks in the Founder University. And we see people who are taking it seriously. And watching people work, this is like a great lesson for me in my life, is when you watch people work, kind of hard to fake it. You can. Kind of hard.

So if you can like make a great steak and I watch you make it, and then I take a bite, hmm. You know, like that means kind of hard to fake. I mean, you could have gotten lucky and made the perfect steak, but I doubt it. Okay, we'll see you all next time on, oh, you know what, Alex, everybody had a question for me.

Where's the All-In episode? We'll see you all next time on this week's Starvation. Bye-bye.