One of the elements of people judgment

is what is the right founder for the

right market. I really like a certain

archetype of founder. I call them the

technical terminator. The thing that I

like about these technical terminators

is they start technical and then you

never know if these people are going to

become commercially minded excellent you

know sort of business people. And then

over time they learn the business side.

I think early stage investors can often

give you an interesting opinion about

what the distant future looks like.

Probably great growth stage investors

like you can give a really interesting

view on what the near to medium-term

future looks like. the companies that

you've backed are sort of a who's who of

leaders across different technology

sectors. If you had to think like three

to five years out, what are some of the

most interesting ways you think the

future will be different than the

present based on your experience with

the companies that you've backed?

>> Obviously, the big topic that we're

tackling and trying to figure out in the

near future is the impact of AI. We've

backed a ton of really exciting

companies at every layer of the stack

and we can talk about that and, you

know, that's been part of our strategy.

uh you know from the model layer um

infrastructure and tools applications

I would break it apart into what do

consumers do and what do enterprises do

in the AI world and then I have a bunch

of views on how the world's going to be

different as it relates to American

dynamism you know hardware plus software

robotics autonomy stuff like that on the

AI side for consumers I think we need to

be really humble about where we are

right now but I don't think that we have

yet found the dominant in AI we may have

the the dominant And you know, OpenAI

and Chad GBT has grown faster than

anything in the history of technology.

You know, I think they reach the same

scale as Google, something like four

times faster.

>> You know, billion people using it. And

they're only monetizing a tiny piece of

that, which I think is a really exciting

dynamic.

But I don't think that the future of how

we interact with AI is going to be a

chatbot. Like I just think that's way

too limiting. I think the big shift will

be uh a sort of what is reactive today

to something that's proactive in the

future and chat GPT may be able to

capture that and I think they probably

have the best chance of doing so but I

think the way that we interact with all

this stuff is going to change

dramatically it's going to have long

form memory it's going to be multimodal

um and it's going to be proactive it's

going to offer us uh you know solutions

and how we do things so I'm super

excited about that but I think the

open-ended upside of what companies can

capture in economics from that is kind

of endless in size. You know, I like to

look at uh history of consumer internet

companies and what were our perceptions

and then what actually ended up

happening reality. So I think it's

instructive to look back at Facebook and

Google and I remember when we were in

the private markets looking at

investments in things like Snap and

Twitter you know 10 plus years ago and

we would always sit and say well yeah

but Facebook and Google only monetize at

X certain amount and you know all the

consumer internet businesses are sort of

Psq businesses and you know the P is you

know quantity is has ended up being you

know billions of users kind of two and a

half two and a half billion users or

more in each case. Uh, but we always

said, oh, you know, Facebook or Google,

they make 20 bucks a user. So, like

that's kind of the upper bound. And fast

forward 10 years later and Facebook and

Google make like 200 bucks a user in the

developed world. And so when we look at

things like chat GPT, it's really fun to

think about this. It's like, okay, how

much time do people spend? What kind of

value do they get? How much consumer

surplus is there? And how do we think

about valuing that? And it's pretty

open-ended, uh, which is which is really

exciting right now. So the really

interesting thing is, you know, if you

look at JHPT and the consumer stuff,

there's like a billion users. They

monetize less than 50 million of them.

And how will they monetize the rest?

That's a really fun problem to try to

tackle.

>> Uh I think I think it's hard to describe

what it'll be. I think it'll be some

form of like an affiliate thing that

happens. It's like a new native thing.

Like it's the the thing I always say to

people is, you know, uh we again we got

to be humble in how we think about this.

We never would have predicted what a

feedbased advertisement is. Like no one

would have known what that is because we

didn't even know what the feed-based

product was. It turns out it's probably

the best advertisement format in

history. Like it's really really

compelling. Um and so it's not

surprising that it monetizes really high

and and people actually really like it.

Like I really like Instagram ads. So you

know the a year ago this the sort of

light bulb went off for me. Maybe it was

6 months ago. Um, I did deep research

on, um, you'll probably relate to this,

a new baseball bat for my son. And so,

you know, he's 9 years old, and it's

pretty complicated. It's like, okay, it

needs to be a certain length and drop

and all these certain specifications.

Uh, and, you know, there's there's this

year's version and last year's version.

And if I had to do that on Google, like,

it would be a total mess. Like, I would

I would struggle with it. Amazon, no

chance because of the ads. Deep Research

was really, really, really good at it.

and it kind of solved my problem for me.

Uh, and so light bulb kind of went off

for me at that moment. One, the models

are going to get so much better. And

two,

to me, it's sort of an execution problem

of building the capabilities to go

execute that stuff on your behalf on the

web. And so, I think that's a really

exciting future. There's going to need

to be tons of guardrails built into it.

You got to build a ton of product and

piping to do so. It's really hard. you

know, Instagram famously tried to do

shopping kind of natively and it it it's

just too hardly. But I think that's a

pretty exciting future and shopping is

just one category. Yeah. Um so, you

know, if I take a step back and I think

about AI today, really active users

spend almost 30 minutes a day in the

products. Like for context,

users spend like 50 minutes a day on

Instagram and like 70 minutes a day on

Tik Tok. They're monetizing only a

slight few of them today. Consumers get

a ton of value. there's going to be a

ton of consumer surplus available and I

think that could lend itself to the

creation of a a huge company, massive

company. Uh and again I think Judge Bat

is in the lead today. Uh but it's early

>> in in that specific area of the world,

the sort of pure AI part of the world.

Where do you feel the most different

than your peers in what you think

matters, what you think is exciting or

or not exciting worries you have? Like

where do you feel most divergent

>> from your friends?

>> Um I feel like I'm probably reasonably

consensus on the excitement on the

consumer side. Yeah,

>> I can put it into context around the

sort of upside around price that you get

P on the P times Q especially if time

spent continues to go up which I think

it will as the models get better and

they have memory and things like that. I

think on the enterprise side, one of the

lessons I learned from SAS and cloud,

which by the way, the advance the

advancements of SAS and cloud are tiny

compared to the advancements of what AI

is going to do, is I think maybe a

little bit more expansively on what the

companies can become on the enterprise

side. Um, but maybe I'm slightly more

skeptical about what their ultimate

business models will be. So one of the

really fun topics that people debate

with with high degrees of confidence uh

that I have very low confidence in uh is

what is the ultimate business models of

these companies and people put up these

super compelling slides that are like

hey you know the whole software industry

is only whatever $400 billion but look

at how big white collar labor is and

we're going to go get a ton of that. And

to me that's like a little bit handwavy.

So, you know, there's a couple of areas

where the business model has progressed

in a compelling way to go tackle that

directly. So, customer support is one,

but because there's a very discreet task

with very simple completion analysis

that you can do,

it's kind of simple to price it on that.

Like you can shift a business model from

a seatbased thing for Zenesk or

something to a new business model where

if you successfully complete the task,

you can charge on that.

>> You know what it's worth. you know what

it's worth.

Maybe the next furthest developed area

is coding. Um, but it's not completion

of a task. It's consumption driven. And

especially in the developer world, that

whole world is used to plan paying

things on consumption. Like it's kind of

how it has all shifted over the last 10

years.

Everything else I think is pretty TBD.

It's going to be very hard. And I think

when you see major technological shifts,

it's very tempting to say, "Oh my gosh,

there is so much economic value that all

these companies are going to capture um

top down." The reality of doing it is

much harder. And you know, I I always

say to people like 90% of the

technological surplus is going to go to

the end users. Like just start with that

as the assumption. whether it's

consumer, whether it's enterprise, you

know, like a a funny analogy that I

heard from somebody else is, you know,

how would how is the steam engine

ultimately priced? Like it wasn't priced

based on replacing like 50 laborers. The

competitive forces drove it to a certain

price where there was an appropriate

return on capital. Um, but the vast

majority of those productivity gains

went to the end users of those those

machines, not the not the maker of the

machines. And so I think something

similar will probably happen in the

enterprise.

Even with that, you can create the

biggest businesses in the world. So, you

know, an analogy would be Apple, right?

Like what would you pay for your iPhone?

>> A lot more.

>> I mean, yeah, that the sky's is the

limit. Like 90% consumer surplus is

probably low. Uh, you know, if the

iPhone costs a,000 bucks or something

like that. Um, so, you know, I'd say the

same for Google. I'd say the same for

Facebook. It's going to happen in

consumer. Consumers are going to be the

ones who realize the surplus. The same

is going to happen in business, but I

think the next generation of business

companies can still be much bigger than

the previous generation of companies

given the capability gains. Um, when I

last ran into you a couple years ago in

person in San Francisco, we were talking

about Whimo and you you were sort of in

the mode of like intensely studying that

company and thinking about it, which

makes me very interested in this class

of companies where you heard about Whimo

and self-driving as a service for a

really really long time with sort of

nothing happening and then all of a

sudden, you know, last time I was in San

Francisco a couple weeks ago, it's just

every other car. And the explosive

nature of Whimo as an example is really

cool to watch. There's all these other

technologies. You might call them

American dynamism and horiz,

you know, small modular reactors or like

really exciting big technology ideas

which are uh you understand the

potential like if we had an in-home

robot that'd be awesome but it's really

hard to figure out how long it will take

maybe similar to how long we took or

something. How do you think about

investing in those kinds of companies

where like it's incredibly exciting?

Clearly, if we had it and it worked, it

would be really valuable, but it's

really hard to know how long it's going

to take to work.

>> It's often these are the ones that are

the biggest market opportunity,

>> right?

>> Like robotics is the biggest market

opportunity. Like we we were all

obsessed with LL.

>> Yeah, if you knew it was going to work

in 5 years, you put all your money.

>> You put all your money into it. Uh I

happen to think it will take a little

bit longer. Um, part of that is informed

by my experience with Whimo.

You know, if you think like I'd contrast

maybe what Whimo does and and you know,

increasingly Tesla and some others, uh,

with what a robot needs to do. And it's

very different. Uh, you know, uh, a a

car needs to basically stay in a lane,

avoid anomalies, collisions, go a

certain speed limit, find places to

park.

>> Sounds simple. Like when I describe it

that way, it's it's sort of, you know,

it's sort of

>> and it's more it's much more complicated

than that. But, you know, simply put,

that's kind of what it has to do. I

contrast that with what a robot has to

do. Like what does a robot have to do in

your home?

>> Endless degrees of freedom. Like make a

cup of coffee, uh, you know, go do my

laundry. But it took Whimo 10 years and

you know if you go back uh to the DARPA

challenge like the whole industry you

know decades uh to get to this point two

decades to get to this point roughly and

so my expectation is technology is

advanced obviously the generative AI

techniques can be applied to robotics to

help it go much faster but I think it's

going to take a long time.

>> So how do you invest in that? So

>> we have an early stage team that is

studying all the robotics companies. We

meet them all. We're learning a ton.

we're waiting for them to find, you

know, the team that they can do an early

stage traditional kind of seed or series

A investment in. Um, and then at the

growth stage, ideally they find that and

we can invest in it or one of these

companies that we're not investors in

really starts to work and, you know,

we've debated what does it what does it

mean to work? Uh, I think we'll know it

when we see it. You know, uh, like there

will be things that start happening and

customers pulling their products that we

will have not seen before. What's the

lesson from Whimo there on what it means

to start to work? Like what what do you

think in the history of Whimo was the

point at which you would have said,

"Okay, now like something happened and

that makes this more investable."

>> So the interesting thing about Whimo for

us, I'll tell you the history of of our

Whimo investment. We originally invested

in 2020 in Whimo. They came to us uh to

raise outside capital for the first

time. So it's just purely funded by

Google over time. They thought it would

be helpful for employees, for hiring,

all that stuff, outside council, all

that, diversify the cap table, uh to to

bring on some outside investors. So, uh

some folks invested in it. We were the

only VC firm that invested in it. Uh we

invested out of our first growth fund

and it was really fun because and this

is seeing the future like taking the

ride in 2019. It was doing some pretty

amazing stuff in in retrospect. uh you

know it could do unprotected lefts, it

could avoid construction sites and uh

the thing it didn't know how to do

actually was like park. You know we got

to a parking lot and it kind of like

stalled and you know we had to override

and go drive up to the front. Uh but you

could see signs that it was it was it

was going to be pretty interesting but

it wasn't on the road. Uh you know we

knew they were going to be conservative

about rolling it out. So Mark and Ben

came to me and they said, "Uh, hey, you

know, we we got to do this whim way

investment." And I said, "Uh,

I no, like I don't like this at all.

Like this is crazy. It's going to take

10 years. Uh, you know, the valuation

that we come in at is going to be really

high." And they said,

>> you know what?

>> Don't care.

>> Don't care. Like this is autonomous

driving. Like are you kidding me? This

is the mother of all markets. like if

they have the thing that can drive cars

autonomously, it's going to be worth a

ton. Like stop overthinking it. And you

know, my team, we had built all this

analysis and why, you know, it would

take forever and the economics were

going to be strained. And so we

compromised and we made a small

investment in Whimo at the time and I

was excited to to be a part of it. I

just I I thought the returns would be

stretched. Fast forward five years

later, uh, at the end of 2024, they

raised money again and at the end of

2024, they had cars on the road and it

turned out you, to your question,

consumer preference slapped you in the

face. Like anyone who was in San

Francisco who had the choice was taken a

Whimo. But at that time, we had the

chance to invest more money, you know,

and it was working. We took that

opportunity to to write a much larger

check and invest. By the way, one of the

really interesting things about Whimo,

so you said you see it, you're in San

Francisco, you see it everywhere.

>> Yeah.

>> How many cars do you think they have on

the road in San Francisco? Because

they're everywhere, right? Like

everywhere you turn, you see them.

>> 10,000.

>> They have like 400.

>> Wow.

>> Yeah.

>> So, it turns out if your cars are

driving optimal routes and uh sort of

fully utilized and not running into some

of the problems that drivers have, like

it's pretty good. And so you can have a

lot of coverage. There are something

like 50,000 lift drivers in the San

Francisco Bay area and uh Whimo overtook

them in market share. It

>> it feels like the appropriate time to

disclose that you and I went to college

together. The the reason I me the reason

I mention that is usually when we get

together we don't jump into talking

about investing.

stuff

>> which makes me realize I don't think

I've ever actually asked you like what

is your investment like philosophy or

strategy or style or taste like like

like what what is it and how did it

develop? My style and taste

is very much

if I were summarized in one line,

I like to pay fair prices for great

companies. Like everyone would say they

would like to do that, right?

The art in that I think is recognizing

where greatness may lie where other

people don't recognize that. And so

>> unpriced greatness,

>> it's priced but not to the fullest

extent. Yeah.

>> Right. Like and so I've studied, you

know, the history of technology

companies and why they outperform and

how they outperform. Often in growth

stage investing,

>> it it's always on the growth side. It's

like, hey, the growth side is where you

get things really right. uh I tell the

team that it's like we can make a lot of

mistakes on forecasting margins and

business models and unit economics and

all that stuff but lots of people know

how to do that analysis that's out

there. So where can you actually get

edge? You can get edge from product

insights, market insights, and people

insights. And so how do we maximize our

likelihood of doing that

on the people side? I'll start there

because that's probably the hardest to

do and I've gotten it right a number of

times and I think I have reasonably good

taste in people. Like I really like a

certain archetype of founder. I call him

the technical terminator. I'm very close

with with Ali from datab bricks. Ali is

the technical terminator. Like he

>> self-evident.

>> It's self-evident. Uh it wasn't

self-evident,

>> you know, all along. He actually wasn't

even the CEO,

>> you know. He he became the CEO later.

>> Uh

>> but he started the open source project,

right?

>> Yeah. He was one of seven. One of seven.

And so he was not the CEO. Uh there was

a much more established uh guy who we've

partnered with on a lot of companies.

He's he's been a co-founder of a lot of

companies. Great companies have come out

of his lab. Yan Stoka uh in Berkeley.

The thing that I like about these

technical terminators

is they start technical and then you

never know if these people are going to

become commercially minded excellent,

you know, sort of business people.

Um, and so you have the grounding, you

have the products. Those are the people

that are likely to figure out the next

product area because they're technical

because they're in the products. Um, you

know, Mark Zuckerberg is an example of

this. Elon's a great example of this.

Um, and then over time they learn the

business side. So, it's it's been so fun

to work with Ali because he knows more

about like sales ops and hiring

processes and reporting lines and all

these things you have to do as a manager

uh than probably any of our CEOs, but he

learned them all. Like he's just been a

sponge. Like,

>> you have a favorite counter example to

the technical terminator like somebody

that is completely non-technical?

>> Travis.

>> Okay. Interesting.

>> Yeah. At Uber.

>> Yeah. So one of the elements of people

judgment is

what is the right founder for the right

market, right? And that market was just

a pure

battle. Like it was like you needs

>> Yeah. Like you fight mayors, you fight

competitors. And by the way, there there

were competitors like you know and so

you just needed to be ruthlessly

competitive and driven and operationally

intense. And you know that's he's the

perfect counterex example to that and we

were we were I was an investor in Uber

at GA. Uh and you know he he's the

archetype but there's a lot more of

these technical ones that become great

business people in my life. You know

George Curts from Crowdstrike is a great

example of it. I I'll tell you one more

example which is not as obvious. Dave

from Roblox. you know when we met him I

met him you know maybe 10 years ago or

something and early days of whether it

was actually kind of working and he was

technically brilliant and he was so deep

in the product and you know he's the

kind of guy that on the surface if you

didn't really know him well you would

kind of be like oh is he a little bit

he's a little quieter and it turns out

like he's ruthlessly competitive and he

really cares about market cap creation

and like his stock price going up and

for the right reasons um you know Dylan

from Figma is a great example of this.

Like he's so nice. He's one of the

nicest guys in our industry,

>> but he is brutally ruthlessly

competitive. The new AI guys and and

women like it's been really fun to see

them develop this. Michael from Curser,

Shiv uh from a bridge who's practicing

practicing cardiologist who has then

shifted his attention

>> uh to you know building a technology

company. He uh he lives in Pittsburgh

and he commutes to New York uh to work

most of the time and uh I was with him

in the office the other day and and he

said, you know, he's showing me the

office. I'm like, oh yeah, cool. That's

great. That's nice. He's like, "Yeah,

I'm going to put a bed over there. I'm

going to start sleeping in there." I'm

like, "Man, you're you're like a a

doctor with kids and stuff." And he's

like, "No, no, no. I just want to I want

to be working all the time when I'm in

town." Uh so you know I love that sort

of relentlessness, intensity paired with

you know technological capabilities,

product understanding.

>> Um and you know backing people like

that,

>> they're going to like pour everything

they have into winning,

>> but they're also more likely to figure

out the next things and navigate complex

markets and changing environments. If I

had access to your entire calendar for

the last 5 years or something and saw

all the companies and the debates where

you ultimately didn't invest but almost

did, what would I learn from like that

batch of companies and founders? This is

a very humbling job because we make so

many mistakes. Errors of commission are

really painful. Errors of omission are

really, really painful, too. And they're

more costly just economically because

you can lose one times your money uh if

if you get things wrong on an error of

commission. But you can forego making

really high returns if you if you get it

wrong. There are no common patterns. I

would say when we get it right on a on

not doing an investment, it's typically

for the right reasons. It's typically

because we see something that we don't

love about the business quality. You

know, we feel really really really

strongly about market leadership. Do you

know the Glengary Glenn Ross movie?

>> Yeah, I know the movie. Yeah. uh you

know the scene with Alec Baldwin,

>> refresh our memories.

>> Okay, so Alec Baldwin comes in, there's

the scene with Alec Baldwin where uh you

know he's he's running like a sales

contest. This like a boiler room setting

and he comes in, he's running a a sales

contest and he walks in and he's like,

"Okay guys, new contest. Here we go.

First prize gets Cadillac. Second prize

gets a set of steak knives. Third prize,

you're fired." Right? And so we've

adopted that as a way of describing most

of the technology markets that we live

in. So we happen to think and I happen

to think strongly and my experience has

been the vast majority of market cap

creation is going to go to the market

leader. And this is probably

underappreciated like we see this all

the time with our peers in the in the

growth investing industry where they say

things like yeah you know even the

number two player like is going to be

really viable like maybe but like more

often than not that's not the case.

That's kind of obvious in network effect

driven businesses, consumer internet

companies, Google, Facebook, etc. It's

it's less obvious in enterprise

companies, but it happens just as often.

Like there's no number two to

Salesforce. Like Salesforce is

Salesforce, workday is workday. Service

Now is Service Now. Like, and you'd feel

a lot of pain if you did the number two

or god forbid the number three in those

markets. In early days of technological

shifts, markets tend to fragment in ways

that we don't foresee and they end up

being less competitive in certain areas

and people kind of settle into different

areas. So, you know, on the model side,

so far the way it looks like it's played

out is

it will be more like the cloud industry

like it's not going to be a winner take

all. Certain technical advantages seem

uh limited in time frame, right? like

there's kind of you know always this

kind of constant leaprogging of the

model industry. So I think it will look

like you know the the cloud industry in

the sense that there will be multiple

players there will be profit pools for

them. It's it's sort of like uh early

days we we were saying like is this

going to be aircraft manufacturing or is

it going to be airlines like those are

the two extreme ends of the spectrum.

Aircraft manufacturing has high profit

margins um because there's really high

capital intensity and it's extremely

hard technically.

>> So that like would seem to mirror the

the model industry. Airlines on the

other hand, you know, are horribly

competitive industries and you know that

they all go bankrupt in the fullness of

time. So it seems like the model

industry is going to be like aircraft

manufacturers or the cloud industry.

>> Why did cloud play out the way it did?

Like is it just size of market? is that

>> I think it's size. Yeah, I think it's

size market.

>> Is that is it that simple that if the

market's big enough, you're just going

to have multiple winners and winner take

all.

>> Yeah, it's size and market. Um to me,

it's all that one is all size of market.

Like it's just so vast. And cloud is

such an interesting market because the

cloud like if you could just

independently own AWS, Microsoft, Azure,

and GCP, like those would be some of the

most valuable companies in the world.

Like those would be awesome businesses

to own.

on the other side of it. You know, my

one of my partners, Alex Rampel, has

this has this has this statement that he

likes to say, which is like the best

best businesses in the world don't have

customers, they have hostages.

>> That's not actually the case in cloud.

Like, sure, there are some things like

egress fees. Like, the clouds are

anti-competitive with egress fees. Like,

they make it really hard to leave and

get your data out and all that stuff,

but that's kind of minor. Like,

generally speaking, the customers in

that market are well served. Like,

they're happy. like it's been positive

some for them you know and at the same

time the clouds are really good

businesses

>> I think the same is likely to happen in

the model space and so the market is

going to be so big it will fragment in

ways that we don't yet expect and you

know even if you're in a number two in

terms of absolute revenue size or you

know sort of market awareness uh that's

okay

what's not okay probably I would think

is being in the number two in something

like the dominant consumer, you know,

chat interface or something like that.

>> I want to talk about competition in our

industry for investment opportunities in

the market leaders led by technical

terminators or or others. It it's become

in our collective careers, you've been

in this specific business much longer

than me. Uh but in across your career,

it's become way more institutionalized.

There's way more players. There's way

more money. the people you're up against

on a daily basis are probably more

talented um sometimes by a lot. Uh so

you have to keep up with that. How does

the competitive describe the competitive

dynamic when you are trying to make a

big investment in a big exciting company

led by a consensus amazing person in a

big market like what does that feel like

now? And I'm also interested in how how

it's changed over time.

>> Yeah. So Mark and Ben have told the

stories about the origin of starting the

firm and you know their experience with

the venture capital product and you know

why they built the firm the way they

they did and whenever they tell those

stories I'm like that's great and man

wouldn't it have been fun to compete in

that time like that would have been

awesome. The market is definitely more

competitive now. It's become a lot more

institutionalized for good reason

though. Like the thing that I'm telling

our team and I talk about with my

partners now is we're a grown-up

industry now. Like this is no longer

some little bespoke asset class. When I

started my career, there were, you know,

you and I were getting out of college.

How many There were probably one or two

technology companies in the largest 10

market cap companies in the world. Now

it's eight of 10. Eight of 10 and seven

of the eight are West Coast technology

venturebacked companies. Like I feel

like that hasn't that realization hasn't

really fully hit uh you know the finance

industry. You know if you look at that

tech has kind of overtaken all of the

market cap creation and is driving you

mostly driving force of the stock market

and the economy. The private markets

have become a real asset class. This is

something I'm studying now. Uh because,

you know, the venture industry, you

know, is sort of seen as like this non

small non-scalable thing. Turns out

there's 5 trillion of private market cap

that is, you know, up 10x in the last 10

years. And it's honestly some of the

best companies in the world. That market

cap represents almost a quarter of the

entire S&P 500. It's more than half of

the mag 7. So,

I think that we now are in the grown-up

in the big leagues and we need to start

acting like it. So, we've adapted our

firm a lot to that realization.

Um, and oh, by the way, one other

comment just on that industry, you know,

and how it's changed. We just did this

analysis. If you look at our public

universe, so where do we spend most of

our time? It's like software consumer

and fintech stuff.

the public universe in those sectors,

there's less than five companies growing

30%.

It's kind of staggering like that's a

low number. Our our portfolio on average

dollar weighted is growing 112%.

And some of these companies are big

enough to be you know the the large

companies. And you know if you look at

the small cap universe and the public

markets first of all public markets have

shrunk by half in the last 20 years. And

if you look at the uh the the sort of

composition of small cap public

companies, the quality I would argue is

so much lower than what is available in

the private markets. So the industry is

real. It shouldn't be a surprise that

the competition has intensified. I think

about the competition similar to how our

venture folks think about it, which is

the market has sort of become a barbell.

um you know and so we're faced with the

the large multi-stage firms that have

very strong venture practices on the one

hand and those are the fiercest

competitors for us. I respect my peers

there. They're trying to play the same

game as us which is when we have

something special at the series A or the

seed like we want to hold it really

tightly and they want to do the same

thing and sometimes they're effective at

it. Uh sometimes we're effective at it

but we have to kind of battle that out.

on the other side is you know on the

venture side it's sort of bespoke kind

of uh you know in the retail analogy

there's like the the superstore like the

Walmart and you know Amazon which is

sort of how we would get characterized

and then the other side is sort of like

the Gucci store you know or the Prada

store which is like deep specialization

so you know Nat and Daniel would have

been an example of that you know Ilad

you know is an example of that and then

there's many others that do a really

good job, you know, at what they do. So,

you know, I have respect for a lot of

the crossover folks, you know, who are

in our world and and have built private

businesses and and have done a good job

with it. So, what do you do to beat

these people? Like the actual extreme

versions of the answer, like the lengths

that you're willing to go to to win. I

>> I think you would love to have some

story that's like sensational in the

moment where we did something crazy. The

reality of the growth stage business is

we win deals based on years of

relationship building. You know, we

recently did a deal where the founder,

we had sort of worked the founder so

hard that, you know, he called us and uh

and and he was like, "Hey, I'm ready to

do this. I'll just talk to you." And I'm

like, "Oh, wow. Okay, fruits of my

labor. Like two years of this. This is

good."

>> Then at that point,

>> he's he it's one it's one of the best

companies in the market. And the dynamic

that we are faced with is okay, this is

awesome. I got a clean look. I know for

sure if he was going to market, he would

get a higher price than what he just

told me, but can I bear the price? And

so that's often the exercise that we

have to go through as growth investors

is what do we know differently about the

product or the market or what are our

expectations

that will allow us to do it that maybe,

you know, aren't as obvious. And so what

what are you doing in those two years

that earn you that right?

>> Maybe that's where the extreme measures

are.

>> Helping them as if we were already

investors in their company. And so

helping them with candidates, helping

them, customers, spending quality time

and showing that we understand their

business. Like often that's the biggest

thing. Honestly, the for the companies

where we're not existing investors,

oddly enough, sometimes it's easier

because our platform is so strong, our

brand is so strong. I'll give you

another fun example, which was, you

know, Dylan at Figma. When we first

invested invested in Dylan at Figma, you

know, I was considering joining the firm

from GA. This was 2018. You know, one of

I knew all the guys already at the firm.

And so, I'm spending time with Peter

Lavine, who was one of our partners. And

uh you know I come in and I'm like Peter

what what's top of mind? You know how

are you thinking about the growth

business? What can I tell you? And he

was like we need this tomorrow. We got

to invest in Figma. Like we need this

tomorrow. Like we I don't know how we

didn't you know we we we missed it. We

you know I was late to it. Like we just

need a growth business and it was a

growth deal and we should have done it.

It's crazy. We did GitHub early. How did

we not do this one? And he was just like

apoplelectic you know like I I need

this. And so that was very encouraging,

exciting. So day one, you know, I told

you I knew the six companies in the

portfolio. I also knew like the five-ish

companies that I really loved outside

the portfolio. You know, Roblox was one

that I was close to. Figma was another.

And so from the moment I joined, we had

done the fullcourt press on Dylan. Like

he came to our summit. You know, it was

Mark and Ben bear hugs. Like he was

really into crypto. We bear hugged him

on the crypto side. Like we did

everything we could with him, helping

him with a board search. who placed a

person in our network onto his board

like we were trying to do everything and

you know trying to catalyze a deal and

he was like I'll let you know when I'll

let you know when

>> so co strikes and he calls us and he's

like now's the time like oh my god this

was in the moment of co where we all

thought the world was going to end you

know everything was screwed

>> stock market was way down you know I

felt like oh great good timing uh so you

know at least we got the luck and so he

you know he came and pitched we had done

all the work and we're having the debate

as a team, you know, was taking this

traditional me and my team were taking

this traditional growth lens looking at

it and we're like the market for

designers is market for designers is not

that big. You know, it's like really

small and if you do the math of the

market size of designers and what they

charge, you know, just I don't think

that the price makes sense at $2

billion, like this is just it's too

limiting. And our venture guys were

losing their minds in this discussion.

They're like, you guys are totally

missing the point. like the number the

ratio of designers to engineers is

basically double for the modern

technology companies. So that's a

leading indicator. Everyone is going to

you know that ratio is going to change.

There's going to be double the designers

in the world. More importantly, the

whole engineering to design process is

changing and there's sort of a a melding

that's happening of front-end

engineering and design. And so thinking

about this as the market for design is

way too limiting. and so you're just

missing the point. We were debating it

and you know it was like speaking past

each other and finally Ben called it

off. He's like, "Okay, all right." Like

we're not going to solve this tonight.

You know, ultimately it was it was a

call on the growth fund side and I slept

on it and I woke up and I was like,

"Look, this is an exceptional business

model and we're kind of squinting to

believe enough on the market size, you

know, great founder, great business

model. Is the market good enough?" And

I'm kind of happy to take that risk. The

risk I don't want to take is quality of

business, quality of founder, but you

really had to have a nuanced view of the

market in order to get there as a like

with a traditional growth investing

lens. And so fortunately, we got there.

You know, it worked out really well. I

bring up that story one to say that's an

example of something where you kind of

have to the price is the price and you

kind of have to figure out if you can

take it like if you're willing for the

very best of the best companies. But

two, I think it speaks to the advantage

that we have and what you need to be

successful in growth investing. Like you

need those product and market insights

or you're just going to live in a

spreadsheet and die in a spreadsheet.

And so uh you know everything that we've

done or I've you know I have done and

our our team has done to design a

process of tightly integrating with our

early stage teams has been in the spirit

of optimizing insights around people

products and markets and I think that's

where you actually get success. One

thing that I'm trying to do more of

because I'm just interested by it is the

to hear about like the minutia of your

day and life like the in in this

incredibly competitive environment. I've

become interested in how some of the

best investors literally just like run a

given day.

>> Yeah.

>> And what that looks like for you and and

I think you'd be surprised like how in

the weeds I'm interested in learning

about. And so like air on the side of

detail, like I'm just I'm just curious

what the actual life of your job feels

and looks like. You know, Bob Swan, who

is a a longtime mentor and friend of

mine and and an operating partner at our

firm, gave me this really good advice

that he and John Dano at the end of

every year always went through an

exercise where they spent like two hours

looking at their calendar from the year

and then they had an objective of

cutting 30% of stuff that was on their

calendar and that, you know, there was a

way for them to make sure that they were

giving responsibility down to the people

on their teams. but also that they would

get leverage. So, he's given me that and

then he reminds me of it when he can

tell I'm too busy uh with things that I

shouldn't be. And so, I think I'm like

not very good at this, but I'll I'll

answer the question anyway. I try to

make sure I'm spending

adequate time meeting companies. So

right now our investment business looks

something like 2/3 relatively known

companies and one-third like kind of

newer stuff. But I want to make sure my

time is spent pretty differently than

that. Like I want my time to be 20% on

those known companies and spending time

with people like Ali and you know the

founders Vanderol like whatever it may

be flux safety but I want most of my

time spent on the new stuff like because

I need to be learning about those new

markets and so constantly meeting with

AI founders talking to to smart AI

employees and making sure that I'm deep

and conversational and have an

understanding of those markets. So I

spend a lot of my day on that. I've

started to kind of move away from like

doing one-on ones and I'm like, you know

what? I don't need to schedule one-on-

ones. I talk to my team all the time.

I'll call them after hours. I've started

to very deliberately block off hours and

days. So, I block off two hours every

Tuesday, two hours every Thursday. Um,

and then I also put an hour and a half

block twice a week in afternoons.

And that often gets consumed with things

that are pressing and you know I need to

make calls or whatever it may be. But I

find that I learn a lot and develop a

lot of my own thinking just by having

think time. You I'm the kind of person

that has 20 things open in the browser

and I want to read them all and then I

don't get to them. Uh so unless I block

off a bunch of time I actually just

don't find that I'm spending the time

learning as much as I should. You know

that's I'd say trying to learn about

companies, spending time with

entrepreneurs. I want to be 80% of my

time and then 20% is spending time with

founders, you know, internal management.

Um, you know, time shift when we're

fundraising.

>> How many new companies do you think you

meet a week?

>> We as a growth fund probably meet 30

>> companies a week. Now, not new, probably

30 companies a week. I personally

probably meet 10 maybe somewhere around.

>> How do you run those meetings? Like if I

came into one of those 10, what is the

structure of the meeting?

>> I keep the introduction super brief. I

like to jump in and say, "Hey, why don't

you please spend, you know, five minutes

explaining to me the strategy and your

vision?" Because I've read your website.

I know a little bit about the company.

I've talked to some customers maybe, but

like I need to hear the vi like the what

is the bigger thing. Like what do you

want to tell you? tell me uh and then I

just ask questions for 20 minutes.

>> Okay, so what do you think about this?

What do you think about that? This may

be a stupid question, but can you tell

me about this? And I find that to be a

lot more effective. Um and you know, the

ultimate compliment that we get from a

founder is like,

>> thanks, you've done your research or you

know, hey, thanks for asking that

question. That's pretty that's pretty

smart.

>> If you think about the reasons why you

do this versus something else, what are

the most important ones? Like why why

don't you why aren't you a founder? Why

don't you work in some other industry?

Why don't you have your own firm? Like,

there's other things that you could do.

What are the most important reasons why

this is the thing you do?

>> So, my wife would say that I have a low

attention span. What she means by that

is I'm interested in a lot of different

things. And this is a really cool way of

getting to learn about tons of new

stuff. I suspect this is the same reason

that you like to invest is how lucky are

we? We get to sit and spend time with

the entrepreneurs who are building the

most interesting companies in the world

right now. We get to learn about the

most cutting edge technology stuff that

if you were in the public markets or

just in a job, you would never get a

chance to learn about. So I love to

learn and I love to be around, you know,

kind of great founders as they're

exploring really interesting things. So

that that part of it is really really

attractive. There's another part that

plays to a totally different side of me

which is this business is a scoreboard

business and like I convey this to our

team all the time. There's a scoreboard

in this business and our expectation is

that we win. Now, it's a very longdated

scoreboard, you know, especially in the

venture side, but on the growth side

even, it's a pretty longdated

scoreboard, but at the end of the day,

like we have to put up returns like our

customers are our founders and our LPs.

And on the founder side, we need to make

sure we do a great job with them and

they're sort of a virtuous flywheel if

we do.

On the LP side, like it's pretty simple.

Are we doing a good job generating

returns? So we A16Z, we're known as sort

of running ourselves a little bit

differently as a firm. Mark and Ben

really drive that. We do things like,

you know, Ben runs every new employee on

boarding and he runs through our culture

document. When you sign an offer letter

at our firm, you sign your offer letter,

but you al also have to sign our culture

document, which lays out our cultural

principles. I also created a subset of

principles that I wanted to convey for

our growth fund. the scoreboard and we

expect to win is a very direct way of

saying like we better be competitive.

I have one that is we are the Yankees

and we're going to act like it. And what

I mean by that is not, you know, we're

going to be arrogant or, you know, we

think we're the best team or something

like that. What I mean by that is we're

lucky enough to be a part of a firm that

has an incredible brand.

And so we're going to run our team very,

very high performance. Like if you're on

the Yankees, you better be performing.

Like this is the big stage. And so our

expectations for our team, we're very

collaborative. We care about winning as

a team, but you better be good. Like you

better be doing your job really well.

You better be working hard. This is one

of the things that maybe is not as

obvious to people. It wasn't as obvious

to me actually until I joined the firm.

It's so funny when I when I was

considering it, my perception from the

outside before I really started the

process was like Mark and Ben, I don't

know, they're kind of they're like

celebrities, semi-seleelebrities, like

do they really work hard? They got all

these other interests. And I got in and

man, it is a competitive place. Like we

are very intensely competitive. We want

to win. And everybody works really,

really hard. like no one is resting on

their laurels. We're all constantly

chatting non-stop like late at night.

We're all working hard. We're kicking

around ideas. And I love that. I love

the dynamic of of partnership. Uh but

high expectations around performance on

the, you know, why am I at A16Z? Why

don't I run my own firm? I always tell

people kind of have a dream job. Like

this is awesome. I got to join a firm

that was on the top of their game. They

were on the ascent. Um, but there was a

a real latent opportunity for us to

build a franchise on the growth side and

I came from a place with a really strong

culture at GA. Uh, but I joined a place

that is full of optimism and I think you

need that in in growth investing. Like

that is the number one ingredient is you

got to be optimistic. You got to be able

to see what can go right.

But I also got a chance to hire the

team. I got to set the strategy, set the

investment process, take what I felt,

you know, were some of the learnings

that I had, which were great and, you

know, bring those things with me and

leave some things behind. And so, for

example, one of the things that that we

set up at the outset, was a a bit of a

different investment decision-making

process than a traditional growth equity

investment firm, right? So, most growth

equity investment firms have an

investment committee. It's central. you

go, you present, you kind of battle to

get the votes,

>> they they disappear and then the smoke

comes out and like here's the decision,

here's the decision. What we decided to

do at the firm in the growth fund was do

it totally differently. So, we were

going to actually make the decision

process just like our venture process,

which is single trigger puller.

>> The expectation I have set with our team

and that and that Mark and Ben have sort

of conveyed and and and I think we do a

pretty good job of is you got to be

intellectually honest. You've got to be

transparent and we openly expect

disagreement. But once you disagree, you

disagree and then you commit. I think by

doing it this way, you encourage people

to fully explore the risks of investing

and fully explore the rewards. You're

never in this temptation

to sell or to politic for a vote or try

to influence someone's decision for the

wrong reasons. like you really like

something and you really want to push.

We don't have that dynamic. So I think

it I think it allows us to more openly

explore the merits of an investment and

I think it's been you know a reasonably

good process and and we're small and so

we you know we move very fast. We do

this you know very iterative

iteratively. It's not like we need to

have a Monday investment committee

process. Like my first investment

committee uh decision was, you know,

before I even joined the firm and it

was, you know, Mark Scott and I having

breakfast and we were deciding on an

investment at breakfast. I like to keep

it informal, but we want to make it

rigorous at the same time. The other

thing I did that's a little bit

different is when we hired the team, by

the way, my I feel very lucky. It's one

of the most special parts of the job for

me. It's about 10 investors. So, it's

pretty small. The reason we can be so

small is because we have the early stage

teams. But, you know, a cultural trait

that I think we've done a pretty good

job of building is just collaboration

and and the willingness to roll up your

sleeves and help people as part of the

team's sort of promotion criteria,

evaluation, etc. I put in there

contribution to collective investment

judgment. Like entry level, like from

the start, this is part of your job. you

better be contributing to our collective

investment judgment and it's something

that we're going to evaluate you on from

the start and so it's a little bit

different you know for a junior person

to be faced with that a lot of times the

junior folks when they join they have to

find their footing and you know when do

they chime in when do they not but I

think it's made us you know better as a

as a team at making decisions

>> if you think about the environments that

are better or worse for growth investing

of the type that you do what are those

conditions like if you could cook up in

a in the kitchen like the perfect

environment for you to be deploying

dollars. What are the features of it?

>> Well, the optimal would be

early product cycle, bad capital cycle,

>> but those rarely happen in, you know,

coincide with one another. If I had to

pick, I mean, it's it's all early

product cycle for the style of growth

investing that we do.

>> What does that mean early product cycle?

>> It means we're at the outset of a new

technological change,

>> beginning of that is going to propel.

Yeah. A new market wave. And so maybe

it's easiest to highlight uh in

retrospect.

>> It turns out that when you and I were

starting our investing careers like we

started at a really good time like

>> you did I was in public markets.

>> Well you were in public markets and so

you had to deal with GFC and stuff.

Notwithstanding that that's capital it's

capital cycle that one.

>> It turns out and it's it's obvious in

retrospect. It's really hard to feel it

in the moment maybe less so because AI

is so well covered and you know the

question is are we in an AI bubble now?

not is there a good product cycle ahead

of us? Um but you know it turns out that

we had at the same time we had the

mobile uh we had cloud SAS e-commerce

all at the same time. Uh and that was a

great setup for us. If you look at all

the mistakes that we've made, you know,

as an industry 2021 is very well

covered. I always tell people the

biggest mistake from 2021 is that we

were actually kind of late product

cycle. And we just didn't realize it at

the time. There was a bit of a head fake

with COVID. We didn't realize we were

late product cycle. And what that means,

you know, in practice is the ideas are

just worse. The market opportunities are

worse. It's just harder to go be

successful right now. You know, when I

talk to our investors, our LPs, they're

all ask me like all of the questions

are, you know, are we in a bubble? Like

is the market too hot? How are you

dealing with valuations? And I'm like,

look, we're we're trying to be very

balanced about this. At the same time,

10 years from now, there's going to be a

bunch of really, really great companies.

And so, we got to be in the market on

the field. Uh, it turns out that, you

know, the last two years coming out, you

know, 22 to kind of early 25, I think

we're a really good period. I think this

is going to be a great a great vintage

of time to have been investing. You

know, we also have been surprised at how

long the companies have stayed private.

Like, it's they've stayed on the they've

stayed on the bingo card for us longer

than we expected. Got it. And that's

been great because we've converted those

in a really, I think, in a really, you

know, attractive way. You know, if you

look at the last year of our activity,

our portfolio dollar weighted is growing

112% and we entered at 21 times revenue.

And so I'll have this debate. First of

all, I recognize that revenue multiples

are flawed and all that. Uh, especially

for traditional investors. If I could

invest for the rest of my career in 112%

growing companies that are really really

great and good in markets at 21 times

revenue,

>> I would do it in a heartbeat. I would do

it in a heartbeat. I think that's way

less risky than something where you're

buying, you know, a 12% grower in PE for

15 times Ebatop because growth just

takes takes care of so much for you. I

think above 30% growth, the market still

doesn't fully value the growth rate.

>> You know, it's Why why is that the case?

>> I think it's just hard to model uh you

know my conclusion. I' I I've studied

all these companies that are you know I

called them the model busters but like

I've studied all these companies. It is

just so hard for any investor to build a

five or 10 year model where where high

growth persists. It's just not natural.

like the natural inclination, you know,

no one built a financial model for

Google or Visa that had them growing 20

years into existence at, you know, 15 or

20%. Like that just it would just be

totally unnatural to do. So, you know,

if you look at the moment of the iPhone,

and this goes back to the point about

product cycles and how much you can get

surprised in 2009, if you looked at

consensus estimates for Apple and then

compared

for for 2013, so 2009 consensus estimate

for the year 2013 and compared it to

actual performance in 2013, consensus

estimates were off by 3x.

Like, that's a massive number. And

that's like the most covered company in

the world.

>> So

I think you can be surprised on growth

on these things. Like I get a big kick

out of that. I try to learn a lot about

it. But I think it's it's not natural to

model anything that way. Like it's so

natural to just say, "Hey, this

company's growing 80%." You know, then

they're going to grow 65, then 50, then

40, then 30, then a terminal growth

rate. And it's very different than a

company if it grows 80 and then the

growth rate persists 75, you know, 65

like it's like a 3x difference in your

valuation. And so you can just get it

massively different. So that's why I

love high growth. I mean, it's obvious

that's the math behind why why I love

it. But, you know, again, it's it's it's

actually just hard to appreciate it

because it's not natural uh to build a

model that way.

>> You and I have talked before about this

idea of like push versus pull companies.

Can you describe that difference and how

that's an idea that you care about when

evaluating them? It's it's magic when

you find a pull business. I have a

post-it note on my computer in the

office that says, "Is the market

demanding more of your product?"

It's the most special thing when it

happens. And and by the way, a lot of

these AI companies, like what's so

magical about the way ChatGpt has grown?

It's a billion users. Like it's organic.

It's all brand. And the shocking thing

about that one, by the way, is it

doesn't have a network effect. Like that

was that was one of the more surprising

things for us. Is the market demanding

more more of your product is probably

the most important question that we can

answer because when it happens,

especially in consumer, it it tends to

create the most special companies in the

world. So, you know, we've seen it in

companies like Roblox, you know, when it

really works. And that one has sort of

two network effects and so it's it's

super special. Um, we also see it in in

companies that aren't network factor

consumer. Like in the case of Anderol,

like turns out the market really really

really is demanding more of their

product. And there's many reasons for

that. We've sort of reached all at the

same time this confluence of AI

capabilities, autonomy, you know, sort

of knowhow and how to navigate

governments mostly from alums of

companies like Palunteer uh in SpaceX

at the same time that we have a

desperate geopolitical need. And so the

market is demanding more of their

product and that's really special. One

of the things that I say about push

businesses which is you know you got to

go sell it like sometimes those are

really successful and there's industries

where this is the case like cyber

security and things like that they don't

tend to get easier over time

>> like they tend to get harder like if you

have to go sell or market your product

the bigger you get often it gets harder

>> and so that's not always the case.

Sometimes you get sort of increasing

returns to scale from brand and things

like that. Um, but especially on the

consumer side, it almost always gets

harder if you're a push business. Tik

Tok maybe is the exception to the rule

where they pushed it early.

>> They pushed they pushed it early and so

aggressively.

>> And obviously, you know, if you're if

you're Facebook, you probably sit around

and think about that decision,

>> you know, forever. Maybe it's not even a

decision. uh I wasn't on the inside

obviously but you know obviously the

growth of Tik Tok was fueled by

advertising on Facebook in large part

which is is is kind of crazy to think

about but you know especially if you're

a sort of Google or Facebook driven ad

business like it almost never gets

easier uh it it always gets harder and

and Google and Facebook are the ones who

have kind of accumulate better economics

over time you know at the expense of the

people who advertise on them. So yeah,

the push versus pull thing especially

like so right now we talk about this in

the age of AI. If you gave us I think

there's sort of like how do we assess AI

businesses right now is an interesting

thing. One is ease of customer

acquisition and we see this with like

the really really special ones like

cursor you know which is sort of been

largely viral growth. It happens even

with things that need to be sold like a

bridge like you got to go sell to

hospital systems. It turns out like

hospital systems are dying for this

because the doctors love it. It's really

good. It saves them a lot of time and

it's really valuable. So, ease of

customer acquisition is something that,

you know, is sort of a must for us in

this AI wave. Um, the second is customer

behavior, customer retention, customer

engagement. There are some head fakes

that we've seen of things that grow

really fast and then they kind of fall

off and they're experimental. So, you

know, the the things that have sort of

durable behavior, things like cursor,

you know, where the users really really

use it ideally or increasingly use it

over time. Harvey is an example of a

company where as the models have gotten

better, customer engagement and usage

has actually really grown. It actually

took kind of a step change which which

we've seen. Uh which is interesting to

see because it kind of happened at the

same time as reasoning the reasoning

breakthroughs. We were like oh that

makes sense actually like lawyers need

to reason and turns out like models got

really good at reasoning and people use

the products a lot more. And then

there's gross margins. And we kind of

give a little bit of a pass on gross

margins. Right now, we're in this funny

environment where, you know, latestage

SAS cloud. We would look at a company

and it's like, oh man, if you're not 70%

plus gross margin, you're not really a

SAS business or cloud business,

whatever. And, you know, that's going to

be a knock and people will trade you

differently. And that's when you get

valued as, you know, revenue versus

gross profit or whatever. Now, it's like

a badge of honor to have low gross

margins because we're like, oh, at least

people are using your AI products. you

know, if we see like we get these

pitches and they're like, I'm an AI

thing and I got 75% gross margins. I'm

like, well, no one's using the AI stuff

then. Like that's doesn't really seem

like an AI product to me. You know, we

give a little bit of a pass on that. The

expectation is the cost, you know, is

going to continue to go down.

>> Just the inference cost.

>> Inference cost is going to go down over

time. I mean, there's

>> so many existential questions about

market structure, you know, that will

predict inference cost. Uh, but, you

know, history of technology would would

suggest that it's going to go down over

time. um you know it's been the the cost

of you know inference has gone down at

the same time that reasoning happened

and so token token usage has gone way up

uh so you know you haven't yet seen any

improvement in gross margins but I think

you know over time that's that's likely

to happen

>> you basically just not care like if a

company has 0% gross margin for example

but the revenue growth and the customer

love and all this kind of stuff the poll

is all there does it round to we don't

care So there's a big difference between

having 30% gross margins and 70% gross

margins. So we do we do care. Our

expectation is if you're producing a lot

of customer value and if the models get

a lot better over time, you're going to

increasingly produce customer value that

the cost is going to go down. There's

not going to be so much market power the

model providers that it's going to

settle out where these businesses are

probably higher margin businesses. I

think they'll be lower margin businesses

than SAS businesses. You know, maybe

they end up as 50% margin companies as

opposed to 80,

>> but the size of the impact and the usage

and the amount that they'll be able to

capture to our point on business model

earlier is probably so high that it it's

fine.

>> How much do you care that the way the

product behaves and the way it's

distributed is like truly singular and

different than competitors versus just

like the best of a class of company?

There's sort of a foundational point

which is every great company either has

unique product or unique distribution.

The best companies in the world have

both. The best companies in the world

have such unique product that it leads

to unique distribution.

But if you don't have either of those,

>> what's your favorite example of that?

I'll use a a recent one um that you know

the the product you know is so good that

people just naturally have gravitated to

it is cursor like you know and again

maybe in the fullness of time that'll

get harder uh you know but GitHub GitHub

is a great example of this right uh I'll

tell a funny story about GitHub too so

GitHub GitHub was so special of a

company that for a long period of time

they never actually talked to customers

so the first time I ever met GitHub

They were like, "We got to tell you

this. This is so awesome. We sold to

Walmart and they're paying us 400,000

bucks and no one ever talked to them on

the phone." We were like, "Wow, this is

an incredibly magical product and an

incredibly magical market." Just imagine

if you had talked to them on the phone.

Like what would they have paid you if

you just called them on the phone? Like

they probably would have paid you $4

million. you know unique product that

leads to unique distribution with a

founder that wants to optimize the

situation. So, you know, the AI the AI

founders like I'm I'm not the one

involved with cursor uh but you know

Michael is a very special founder and

his team they recognize what they have

and then they are aggressively pursuing

the enterprise at the same time and so

that's a really good combination where

you have unique product you have great

product people love you know that leads

to some uniqueness of distribution and

then you can build on that advantage by

saying hey we have all this bottoms up

use like we're going to go sell

enterprises and so you know a big part

of what we do as a firm

is we you know help to facilitate co you

know customer introductions customer new

business we call our go to market

function they're referred to as EBC's

you know sometimes and we get notes

after everyone and this is the most fun

thing in the world of AI because we get

these notes and like in the case of

cursor every single time it's like

immediately to Pac immediately to Pac

you know proof concept whatever uh

immediately to Pac and like oh

immediately to you know fullale And like

the C you can see that like that's

actually incremental data for us in

making decisions but you can see it like

it is magic uh when when it happens. Um

and so Martin led the A of uh Kurser you

know one one of my partners who leads

our infrastructure fund and after one of

these emails he chimed in and it's a big

it's a big list. It's like 100 people on

the list or something. Um he he wrote

product market fit. And so now

we're like, "Oh, you know, PMF is now

PFMF." Uh, and so you kind of you when

you see that, you know, that's unique

product, that's unique distribution, and

like you have a founder, founding team

or, you know, full full set of employees

who really wants to optimize it. Like

>> what are the tradeoffs of the way that

Andre is structured? Like no firm is

perfect. Like there's there's choices

for how you have structured and nested

the team. Lots of different groups,

leaders of of groups like you. What are

the negative parts or the negative parts

of the trade-offs for how Andreson is

structured versus like a more monolithic

structure or something that was just

different? Our strategy for scaling is

pretty well covered. But effectively,

we think scale allows us to bring more

power to the entrepreneurs and give them

a greater chance to be successful in the

market. That's the fundamental that's

the fundamental thesis be behind the

scaling for us and with more resources

you can bring you know more resources to

bear for the entrepreneur. So for us

when I joined

every single Monday and every single

Friday we used to sit in the room

together all of us and we'd hear all the

pitches and then we'd have long meetings

to talk about each of them all as a

group and so you know Dixon was leading

our crypto fund and you know we'd have

bofund pitches and we'd all listen to

all of them and then we'd all debate and

then we realized at a point like that

was not the optimal use of time you know

like Dixon weighing in on a like you

know bio investment and vice versa like

probably doesn't make sense and you

could extrapolate that out to a bunch of

our you know a bunch of our investment

processes. So we decided to decentralize

Benmark decided to decentralize the firm

sort of put you know more power down

into the investing teams that ran each

investment fund and uh the reasoning

behind that is twofold. one, we thought

it would allow us to have better

expertise around the table. Like if

you're only just fully deep in

infrastructure or applications or

American dynamism or crypto or bio,

that's an advantage. It's both an

advantage in making decisions but also

an advantage in go to market with the

entrepreneurs. And then secondly, if we

are going to scale, you can't scale an

organization with like 25 or 30 decision

makers around a table. It's too hard.

like you can't make a trade-off between

should we put an incremental dollar into

a bio fund investment or a crypto

investment or um how should we think

about reserving this verse that it's too

hard and so we we shrank the size of

decision makers by doing this to a

smaller group who's in charge of their

own funds um and so far that's working

really well and I think that's mostly a

function of the fact that our early

stage folks they're really good and

we're all really collaborative

the only trade-off that we have at the

growth fund is selfishly that process

that I described where we all sit around

the table. It's kind of valuable for me

like you know it's good for us to have

access to all information at all times

because we sit across all of our early

stage funds. The way we operate is we

invest across all of our sectors.

>> What what percent of the investments you

make did the firm have a prior

investment in? a little over half. And

then if you take the number of

investments, so if you just do it by

dollars, it's a little over half that

are pre-existing venture investments.

And then if you add the dollars that

we're investing in pre-existing

investments that were pre-existing

growth fund originated investments,

>> it's something like followons, it's

something like 70%. So like 70% of the

dollars that we're investing,

>> like we got deep knowledge on on the

companies. Uh, I call it game film. Like

we just get like I talk about game film

all the time. You know, we it's so

important when assessing an investment,

when assessing a founder, you know, game

film is not just numbers. Like it's

>> How do you do reserving in the growth

fund? Is it materially different than

elsewhere?

>> When we first started the growth fund, I

was like, Scott, zero reserves. Let's do

it. Every single dollar is going to have

to be, you know, scrutinized for

literally every dollar. It turns out

that's not really practical. Like, you

need to reserve a little bit. So, we

reserve a tiny amount. And this is for

small follow-ons where, you know, our

participation is important, but we're

not a lead. We do zero reserving for

large investment amounts that we think

we're going to make in a company because

I think that would lead to lazy

decision-m,

>> you know, we'd say, "Oh, well, we

reserved for it. Let's do it."

>> So, you just treat it as a new

investment.

>> Every single thing is a new investment.

So if you look at our largest

investments in the growth fund and just

run down the list, you know, uh data

bricks, uh SpaceX, Andrew, OpenAI, XAI,

Flock, Safety, Figma, Stripe, Coinbase,

like they're across all they're most of

them are across multiple funds. That's

kind of by design. Like we want it we

want we want to be flexible and say,

"Hey, if we're super excited about a new

investment, it's fine. Just keep going."

We have no target metrics for

inside the inside the fund verse outside

the fund.

>> We have no target metrics for industry

like you know infrastructure versus

American dynamism versus crypto or

whatever. It should always be best ideas

when but I you know manage the fund and

so I closely track like how are we doing

on those metrics and and and generally

speaking like thematically do we feel

like the fund is a good reflection of

what we see as the opportunity set for

the next 10 years. C

>> can we talk about selling? This is such

an interesting topic to me because you

can ask lots of investors that invest in

private markets like when and how they

sell and most of the answers you hear

are fairly simple heristics like one you

hear a lot is you know when there's a

crystallization you sell a third hold a

third hold a third forever Fredson yeah

like now later that'd be one example