Inside a16z’s Growth Bets on Waymo, ElevenLabs, Coinbase, Robinhood, Stripe, Revolut & Kalshi

0:00Alex Immerman:There are fewer than five companies growing north of 30 % this year. We didn't invest in a company last year growing 30%. There's just a major disconnect in those growth rates. OpenAI and Anthropic alone added as much revenue last year as half of the public cloud universe. The most underappreciated company in America right now is Flock Safety. Garrett Langley should be a national hero. The most common question right now is, do gross margins matter? A lot of these AI companies are showing up with 0 to 50 % gross margins, and we're used to looking at companies that have 70 % gross margins. Who do you think will be the world's first trillionaire?

0:37Alex Immerman:Well, if that market existed today, I think it would probably be like 90 % plus odds.

0:53Alex Immerman, welcome to Sorcery.

0:55Alex Immerman:Thanks for having me. Excited to be here. Okay, well, so you work on the Growth Fund and you have a basket of some pretty amazing portfolio companies. Waymo, Calci, Robinhood, Stripe, Revolut, Eleven Labs. What am I missing? Coinbase? Elise AI, Hebbia, Sardine, Anderl. Okay, so let's break this down. How do you manage all of these companies? Yeah, I mean, we're very fortunate to work with what I would think of as the best early stage team in the business. And so we get tremendous leverage and opportunity from them. Of the companies you named and of our portfolio at large, roughly 50 % of our investments are follow-ons to our early stage winners, companies breaking out.

1:49Alex Immerman:those are companies where we're on the board, we have access to information, they're excited to partner with us. That provides tremendous opportunity for us to invest in them. And then the ones that are outside the portfolio, like Akalshi or Revolut, we've met with them many times over the years. 90 % of the companies we're investing in out of our growth fund, our early stage team has met. And so we get to take advantage of those opportunities, even though they didn't pursue them or it didn't work out for one reason or another. What is the most underrated company you've invested in? The most underappreciated company in America right now is Flock Safety.

2:33Alex Immerman:Garrett Langley should be a national hero. They got a lot of positive press attention in December around the Brown and MIT case. their camera helped solve and find the criminal. When we look at it, though, that's just like a normal day in Flock's life. Flock solves over 2 ,800 cases every day. That's 15 % of reported crime in America. And so there's a lot of, oh, is tech doing good in the world? AI, is it good for humanity? Like, Flock is an incredible example, like one I'm so proud of. And like, we need Flock. If we want to eliminate crime in America, we need to deter criminals from doing bad things, right?

3:30Alex Immerman:Like, we don't want bad guys to think they can get away with it. 50 % of murders are unsolved in America. We need Flock to be deployed and eliminate all crime. What are you seeing right now as the biggest difference between private and public markets? There's a big disconnect between public markets and private markets in terms of growth rates they're seeing. So my partners, David and Santi, put out a report calling private markets the new high growth public markets. If you were to scan public internet software fintech, there are fewer than five companies growing north of 30 % this year. We didn't invest in a company last year growing 30%.

4:18Alex Immerman:There's just a major disconnect in those growth rates. If you look at OpenAI and Anthropic alone, those two companies added as much revenue last year as half of the public cloud universe, excluding the Mag7. I mean, just all the growth, if you're a growth investor, is in the private markets. I mean, I think the most common question right now is, like, do gross margins matter? A lot of these AI companies are showing up with zero to 50 % gross margins. And we're used to looking at companies that have 70 % gross margins. And like, do they matter? Of course they matter. They always have mattered, always will matter.

4:57I think how we make sense of it, are the lower margins because of LLM costs?

5:02Alex Immerman:If they are, we're cool that we can make sense of that. The real question is, as we look out, are you a company that's value is primarily related to someone else's model? Are you building something meaningful on top of it? And so through the metrics, can we see differentiation? Can we see defensibility in the workflows, the integrations and the data? And so that's how we've been thinking about gross margins and is the topic to jure today. I think engagement today has really come into the light. around us. I mean, if you think about engagement, it's like a leading indicator of retention. A lot of these companies, they sign annual contracts, they're growing so fast, all of their revenue base that hasn't come up for renewal.

5:48Alex Immerman:And so like, are people actually using the product? We're really excited about Harvey, we led their last round, one of the most exciting parts of that company is, if you look at their engagement cohorts, they're increasing over and over and over. And so you can just see that becoming the lifeblood of a law firm or lawyers inside corporates. It was not too long ago, but everyone was going after$100 million revenue benchmarks. Yeah. Are you still seeing that? The meme has definitely slowed down. I think it's going to become a billion, hopefully. Cursor shared that they reached that in record time.

6:26Alex Immerman:I expect other companies are going to try and get there. Of your portfolio, a couple of them just had some really huge announcements. I'm going to give you some options. You can pick between Waymo and Eleven Labs, and then we'll just talk through them. We can start with Waymo. Let's start with Waymo. Waymo raised$16 billion at$126 billion valuation. It was their Series D. We're really excited to be a major participant there. We've participated in all four of their external rounds dating back to the Series A. They're growing phenomenally quickly. They, in San Francisco, got to 25 % market share really quickly with very few cars, surpassing Lyft and being a formidable competitor to Uber.

7:20Alex Immerman:that is without having like full coverage of the Bay Area, without having highway access or airports until recently. So like that market share was really constrained based on those dimensions. And it was also constrained by the number of cars like Waymo today still is constrained by the number of cars they put on the road. If they put more cars on the road in San Francisco, that market share would be, you know, much closer to Uber, but they're opting to, grow across the country. They're scaling to over 20 new cities this year. And so the growth is very much limited by just getting cars on the road.

7:57Alex Immerman:They have incredible utilization. Look, ride sharing is a great market. Today, it's like$125 billion market growing low double digits, which is a healthy growth rate for a relatively mature industry. 40 % of that is in the US where Waymo plays today. Waymo, as I alluded to, you put cars on the road, they're taking share, high utilization. There's only a thousand-ish cars in the Bay Area, and you can't go down the street without seeing one on each block. It's truly tremendous. But as far as ride share goes, thinking about the ride share market today is kind of like looking at the early days of Uber and looking at the taxi market, it's just the tip of the iceberg.

8:45Alex Immerman:Ride hailing in that aggregate large number I just shared is less than 1 % of vehicle miles in the US. So really like massive, massive way to go. Already, you can look at a Waymo and say, wow, there's a bunch of new use cases opening up. You might be like talking to someone about confidential information that you wouldn't have felt comfortable. I got a text this morning about a parent who got injured and was so excited because they were able to put their child in a Waymo and they wouldn't have felt comfortable doing that in Uber. But that's before the price goes down. And today, Waymo is pricing similar to Uber and Lyft.

9:28Alex Immerman:If you look across the country in San Francisco, it's a premium product. You It's still like growing like wildfire when the price goes down and it's meaningfully cheaper than human led cars. People are going to think about the tradeoff between driving themselves or getting in a human car or getting in a Waymo. And it's going to be cheaper to get in a Waymo. And so the rideshare market is going to grow by, you know, at least an order of magnitude in the coming years. So where does the value accrue? The value, look, I think the value is going to accrue to the driver and whoever is making the driver.

10:08Alex Immerman:There's been a lot of investment. It's a really hard technical challenge. And so I think the driver is where the value is going to accrue. That would be Waymo in this case. I think where margins land over time is an interesting question. Like on one hand, Waymo could go the route that they are today and own and operate cities like in San Francisco and Los Angeles. They own the experience with Waymo One. They are managing the operations and the depots. as an alternative, they could outsource some of that as they are in Phoenix, Atlanta, and Austin, where third parties like an Uber or a Move are managing the operations.

10:50Alex Immerman:And so when you outsource that, and those are like, you know, real costs, you could lead to a higher margin product. This is never going to be like high margin software, but it'll be better than, you know, operating the fleet themselves. From a deal perspective, I want to unpack the process. How do you underwrite a company like this? Do you look at Tesla? Yeah. So this is one where you have to think about a variety of scenarios off into the future. And so to make it simple, I would frame it as there are three like base scenarios. The first is Waymo stays the only game in town. I certainly like hope that is the case.

11:32Alex Immerman:They're dominant market share of a market that grows quite significantly. The second case is the market still grows significantly because it's such a great value proposition, self-driving. However, there are multiple players. That might be a Tesla, it could be a Zooks, it could be a Wave. There are Chinese players as well. But because of the technical challenge, I think it's a productive oligopoly. And then the third scenario is where things don't work out as well for Waymo. And, you know, maybe there's impairment. Maybe one of those other providers has an advantage over them in the fullness of time.

12:11Alex Immerman:I think the most likely scenario of those is that it is a productive oligopoly, that there are many players, but we expect Waymo to be, you know, a meaningful share of that overall market. And how do you compare Tesla's FSD versus Waymo's full stack approach? So we love Elon. We're investors in SpaceX, XAI, which you may have heard are a single company or soon to be a single company. So we're huge fans of his. We have tremendous respect. um tesla from a hardware stack perspective uh they have taken a camera only approach critics would say that lidar provides more data and is better performance in adverse uh weather so like fog snow rain and so um we believe like the waymo approach today is clearly like safer Um, that said, like, if you look at FSD, like the publicly available data, they have shown significant improvement.

13:20Alex Immerman:The slope is, is, is promising. Uh, FSD 14.1, I think showed an order of magnitude improvement in terms of, uh, disengagements. There's a lot of puts and takes with disengagement metrics, but like they are definitely improving. But when you take a step back and compare the data, whether it's disengagements, reported accidents in Austin, Waymo is still significantly ahead today. And we feel really good about their position. Have you taken a Waymo in every single market? I have not been in every single one of their markets, so I have not taken one. But I've taken one here. I've taken one in Los Angeles.

13:56They're dominating all the streets there.

13:58Alex Immerman:I love to hear that. I love to hear that. They're growing really nicely there. They're growing nicely across all their markets. And each subsequent market is growing faster and faster, which is a reflection of how their brand is growing across the country, which I think will be a powerful force for them as you think about their position long term. Nobody wants to have five rideshare apps in their phone, right? So I expect that there could be several players at the end state, but there's not going to be endless. So they've announced partnerships with Uber and Lyft. How those relationships evolve over time is like tbd uh in uh in austin and atlanta you can order a waymo through uh the uber app okay so i'm curious given waymo has such a strong physicality and cultural resonance because it's like the first time in a while that we as pedestrians and civilians can interact with like such futuristic technology robots yeah autonomous vehicles that's that's crazy it's magic it's the best manifestation of physical ai today and the ads for it are like awesome when you have like a grandpa on the back of well when they were like yeah the the the grandparents are like more likely to be like fearful before they get in their first one and then they realize how amazing it is so if waymos are step grandparents are probably going to need to be the first to get their driver's license taken away oh gosh yeah honestly i mean i don't know if i should never mind but But if Waymo is step one of humans interacting with robots, what comes next?

15:39Alex Immerman:Look, I mean, you brought up Elon. He announced last week that Tesla is shifting production from some of their older vehicles to Optimus. I think it would be really cool to see their robots and their humanoids be more involved in our life. China has done a really good job on that front. And I think like the U.S. like needs Elon, needs to continue to push that forward. Sorcery is brought to you by Brex, the financial stack trusted by more than 30 ,000 companies, including one in three venture-backed startups in the U.S. Nearly 40 % of startups fail because they run out of cash. Brex is literally built to help founders avoid that.

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17:09Alex Immerman:turing is training the next generation of ai with tasks that require real expertise and real world judgment that's why companies like nvidia anthropic salesforce and gemini partner with Turing. Turing builds realistic reinforcement learning environments and data systems based on real operational traces, the kind of infrastructure Frontier Labs need to train superintelligence. Visit Turing.com slash S-O-U-R-C-E-R-Y. Are you at all worried about the AI taking over, especially with ClaudeBot and Moldbot? No, I mean, I think it's really exciting. I think that like whole phenomena this weekend in last week is a great representation of how fast distribution is today.

17:54Alex Immerman:We kind of take for granted OpenAI got to a billion users in lightning fast speed, and it's because anyone can get access to these things immediately and immediately deploy. We saw a bunch of our founders messaging back and forth about how they were using it. One of them set up a personal assistant where they wake up each morning. It reminds them of birthdays, gives them an email summary, a great dashboard of what's been done by their team. That happened in a day by one personal agent. We're all super excited about that. I think CISOs are really concerned about the security, what these agents are going to do in corporate systems.

18:37Alex Immerman:But agents are here. It's really promising. You don't think they're going to take over? I do not think they're going to take over. So is software still eating the world? Software is eating the world. Mark was pretty pression in 2011. Okay. So moving through the portfolio. So let's talk about Eleven Labs. Eleven Labs just raised a$500 million announced today. I don't know when this is going to come out, but it was announced today. Yeah. Big round. Huge round. 11 at 11. How did Andreessen originally invest into 11? And then how did you come in with the growth fund? What was the process? Yeah, it's a great representation of what we were talking about before.

19:16Alex Immerman:Jennifer, Brian, and Justine on our early stage team got to know Maddie, swooped in, led the Series A, involved a flight over to London to get the term sheet signed, all those fun things. But they maintained a really special relationship with Maddie. We led or co-led the A, B, and C. The A and B, our early stage team did, we co-led the the C last year and our big participants in this round. It's one where we got to know Maddie through the B stayed close to him throughout the year, watch his progress, try to be helpful. We engaged our operating team a lot there to our like revenue operations team plugged in.

20:05Alex Immerman:This is a company that has like grown in record time. And what's unique about it relative to a lot of companies is they have this beautiful organic consumer business that people look at 11 Labs and they're like, oh, how many consumers, prosumers, influencers are going to use this? It's going to run out of room on the consumer side. It continues to hum. It's amazing and highly organic. The enterprise business has also been beautiful. And it's very rare to have a great consumer business and a great enterprise business. Fast forward to today, the enterprise business has customers like Meta and Salesforce and Deutsche Telekom.

20:46Alex Immerman:They announced Revolut last week. These are massive companies that are building agents on top of their platform. Why have they broken out amongst a sea of voice AI agents? Yeah. I mean, the answer that I keep coming back to is Matty is an exceptionally fast executor. He is really curious. He's really hungry. He's hired well around him. I think like the starting place for a lot of these AI companies is they have the market leading model. If you look at OpenAI with ChatGPT, like their lead came with having the leading LLM. MidJourney's Origins came from having the best image model. I think what like Matty has done really well is like a lot of people in the early days would look at him and say like, yeah, you do have the best model, but is that going to commoditize over time?

21:38Alex Immerman:Is open source going to come? Audio models aren't that expensive. It should be really competitive. And I think like that chip on the shoulder, like the critics, like maybe motivate someone like him to just keep moving faster and faster and build more defensibility and ship product. And so they've shipped more models in terms of breath. The consumer product has evolved. And then now on the enterprise side, they have a huge platform that addresses needs across sectors, across use cases. And so it's been pretty phenomenal to watch. What are the main use cases? So there's sales. There's customer support.

22:15Alex Immerman:There's interviewing. There's health care. There's consumer. There's financial services. They really have a broad array. which is like when you study the company it's actually really impressive how diversified the basis. It's a platform already with all these different modules where their customers can pick and choose and buy multiple things. Like audio, like another one of the criticisms in the early days is like, is audio just a feature? No, like audio is a platform and like the main way today or main way in the future that humans may interact with computers. So how did you meet the CalShe team?

22:56What was the process like there?

22:57Alex Immerman:Yeah. So this is another one where Alex Rampell and Anish on our early stage team were close with Tarek from the early rounds. For one reason or another, it didn't work out. And so dating back two years ago, I was just like intellectually interested in prediction markets. I thought it was pretty cool. I was in New York. I met up with Tarek. This is before they had legal approval. He's walking me through how they're fighting. And I'm like, I'm a growth investor. I don't invest in companies before they have regulatory market fit, let alone product market fit. and uh and so i got to know him i stayed close he obviously uh got those approvals um and uh the election was like a boon for them and the growth has been phenomenal since we stayed close until it started to like really grow and we believe that it was more than just the elections and like boy has it been become way more than just the 2024 elections did we build convection in them and the company.

24:07Why did you choose Kalshi over Polymarket? Did you look at Polymarket too?

24:12Alex Immerman:I am familiar with both companies. It'd be hard to study the space and not be. When you look at Kalshi and their origins with Tarek and Luana, it's hard to find two more resilient founders. They were getting punched in the face for four years and told no. And they took the difficult, but let's say more responsible path towards getting licenses, being the first CFTC regulated prediction market. And as we reflect on why that was important to us, I think a lot of what we saw in them stemmed from our investment in Coinbase and them taking a regulatory first approach. Taking a regulatory first approach builds trust with consumers, regulators, partners.

25:08Alex Immerman:And so if you fast forward for Calci's journey, they have the most consumers and users today. That wasn't always the case, and I can talk about that in a minute. They were first to get regulatory approval. They have Robinhood and Coinbase as partners, CNN, CNBC as partners. These are like real mature organizations that are entrusting Calci. You can't get those types of relationships unless you play by the rules. When we made our investment, Calci was number two in reported volume. And we take great pride in backing market leaders. And so when someone's in a number two position, we have to have a really strong thesis.

25:59Alex Immerman:A lot of that stems to what I just said about Tarek and Luana and the regulatory first approach. But if you looked at their slope at the time, the company was absolutely ripping. The space was growing, but their share gains suggested that in a few months, particularly with sports and the products that they were shipping around sports, that we had conviction that they were going to surpass and become number one. And today they're number one across users, revenue, volume, any metric that anyone would care about. What do you think about the space now that it's evolved? I talked about this on the podcast with Vlad of Robinhood because when they first got into prediction markets, Tark and Luana and Kalshi, you can do some fairly sophisticated things, but it kind of all shifts over to sports and elections and that looks like gambling.

26:55How do you decipher that?