1Mby1M AI Investor Forum: David Hornik, Lobby Capital (Part 1)

David Hornik, Founding Partner at Lobby Capital, discusses his firm’s AI investment thesis. This is an excellent discussion spanning Agentic AI and Ultralight startups.

Sramana Mitra: So, Dave, you’ve been doing this for a long time. You were at August Capital for a while, and I remember when we were one of the three or four people writing technology blogs way back in the 2000’s. So, we’ve been trendspotting, forecasting and reacting on trends for a while. I want to start with the AI driven ultra light startup trend first.

Everybody’s talking about it. If you look at the LinkedIn water cooler, and so on, I am sure the VCs are facing tremendous FOMO on these hyperscalers, and they are salivating to invest in them. How do you parse the trend?

I’ve some thoughts about it, but it would be great to kind of brainstorm about this trend first, because it’s very relevant for our audience. You know, when nobody did, we supported solo entrepreneurs. We’ve always supported ultralight startups and so on. The AI phenomenon is turbocharging that whole business.

So let me hear your thoughts on how you are thinking about this.

David Hornik: I think there’s often this sense that venture capital is the win, or is the loss, depending on who you are. There’re some people who think it is success to raise venture capital as opposed to build a business, or it is a failure to raise venture capital because you’ve given away too much of your company.

What I’d say to that is, venture capital is a tool for businesses that require more capital than the business itself can generate. So, if ultimately you can achieve the things that you’re hoping to achieve, without venture capital and without selling a piece of your business; then great, more power to you.

While I think that great venture capitalists have a lot to add to help you build a business and build teams, I think that venture capital in itself is not a win. I think that venture capital is a tool. It’s the capacity to accelerate your business with capital that you can’t otherwise generate from your business.

Sramana Mitra: I’m so glad you’re underscoring this. We have been ad nauseam saying this from the very beginning of this program. You may have seen my description of entrepreneurship is: customers, revenues, and profits; financing and exit are optional.

David Hornik: Yes, that’s right. If you could build an amazing business where you paid yourself hundreds of millions of dollars a year in profits, great. Then you have that forever more.

There was a great founder here in the Bay Area who started a business and had paid himself a billion dollars before he bothered to sell the business. He sold it for $350 million and it didn’t matter because he’d already made a billion dollars and taken $0 in venture money.

So now having said that, I think there are lots and lots of businesses where the measure of a good investment is also very simple, which is, if I am going to give you $10 million for 20% of your business, can you increase the value of your business by more than 20%? Can you accelerate the increase in value in your business by more than 20% with that $10million?

If ultimately, the $10 million increases the value by 10%, that was not a good investment. But if ultimately, you use that $10 million to double the value of your business, that was a fantastic use of equity. To acquire the capital, you need to increase the value of the remaining ownership.

So that’s the first premise, which is that raising capital is a tool in the same way that debt is a tool, etc.

If you can build an ultralight business that requires no capital or because you don’t need additional capital because you’re leveraging other people’s infrastructure or you’re using an open AI model, and you can make more money than it costs you to deliver that solution, then that’s fantastic. You should go build that.

Whether or not that is a venture fundable business should not be your primary concern. The question is, can you build the business you hope to build? If you can, you should be thrilled that that’s a possibility.

And AI is making that dramatically more possible, right?

It’s easier to create the experience that you want to create. It’s easier to generate the sort of marketing and sales material that you hope to generate, etc. So theoretically, AI should make all of these pieces less expensive and easier to do with fewer humans and therefore more easily sustainable by you. So that’s all great.

This segment is part 1 in the series : 1Mby1M AI Investor Forum: David Hornik, Lobby Capital
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