Benchmark's Five Partners on AI, IPOs, and Silicon Valley's Comeback

0:00Hi, I'm Connie Loizos. And this is Alex Gove. And this is Strictly VC Download.

0:14Hello, listeners, and welcome to the newest episode of Strictly VC Download. I'm your co-host, Connie Loizos, and this week we are running an interview from this year's TechCrunch Disrupt, which was held in San Francisco just a few short days ago. It was a busy, energizing week, and one high point for me was sitting down on stage with the five current general partners of Benchmark, the famed early-stage Silicon Valley venture firm. It was, I think, the first time the current lineup has gathered publicly together, and it is definitely a strong bench. Peter Fenton is, as many of you will know, the veteran of the group.

0:47He joined Benchmark 20 years ago after being poached from a rival, Accel. I am sorry to tell you, but I remember this was big news at the time. Eric Vishria, a former founder who graduated from Stanford at the tender age of just 19, is the second longest serving general partner at the firm right now, having joined in 2014. Then came Chetan Putuganta in 2018 after spending about seven years as an investor at New Enterprise Associates. If you followed Benchmark at all, you may have noticed that the firm tends to pull in very smart people in their early 30s, and the firm also has two very new members that fit that bill.

1:25Av Randall is a growth stage investor who previously logged time at Founders Fund, Bond, and Kleiner Perkins. He joined the firm late last year to help it size up some of the later stage opportunities it should be diving into, primarily out of its own portfolio of companies. Meanwhile, the very newest member is Jack Altman, whose star has been rising in Silicon Valley in recent years. Altman, like his brother Sam Altman, is both a founder and investor. He ran the software company Lattice for years as CEO before spinning up his own venture firm, Alt Capital, and a popular podcast. Then Benchmark reeled him in too.

2:03It was a rare chance to talk with all five at once, and that candidly made it impossible to go deep on any one topic. But it did give attendees a decent peek into how the firm operates today and how it's thinking about the fast-changing landscape of startup investing. Because it really is getting zany out there. I really enjoy talking with them. I think that you will enjoy getting their perspective on things. And we will see you back here next week.

2:32Hi, all. Full house. How lucky are we? So Anthony just reminded you of what this firm stands for and has accomplished over the years. But I do think it's interesting. So I think we all think of benchmark as being associated with a few things. It's notable bets, it's flat partnership where everyone sort of enjoys in the same economics, and also it's almost stubborn adherence to a small fund size. But this summer you announced$2 billion in new funds across two vehicles. Peter, what happened?

3:14Jack Altman: Well, you know, it's the Silicon Valley, our ecosystem is most distinguished, I think, by its adaptability. And that there are certain things that lead you to say the next trillion dollar company is most likely to come from the Silicon Valley. I know you probably have a global audience, but it doesn't mean that there's a zero percent chance outside of the Silicon Valley. And so that question of adaptability and evolution is something that we inherited at Benchmark. And so there's a craft that has not changed, which is the core fund that we have working closely with founders at the beginning. Usually it's a 10 to 15 year commitment and we're really shoulder to shoulder and that doesn't scale.

3:58Jack Altman: So it turns out there's been inflation. Last I checked, it's more than the exact$500 million fund size that we held for 20 years. And so our core fund has just inflated to be consistent with the existing economy. So that's something that we had not done, and that was probably just a tactical error on our part, but it allows us to continue the core business as we practice it for the 30-plus years of the franchise. The T1 fund, which is very much an expansion of our mandate, which is in some ways we get permission from the ecosystem to do more than just the core early stage business. And the permission we had was sort of a fork in our eye.

4:44Jack Altman: So there were a number of opportunities that would have been somewhere between 10 to 1 ,000x that came to benchmark, and we were constricted by our early stage focus. And the conclusion we came to is that there's enough of those opportunities to support a fund that is in the continuum of what we do, where we still think the return profile could be 10 to 100x, maybe 1 ,000x, so it's asymmetric, but very much is a rooted strategy in the core release stage business. So it doesn't replace it, it doesn't compete with it, and in many ways it expands our horizon, but in a way that doesn't distract us, we don't have to hire a whole bunch of growth people and try and be something that we're not.

5:27Jack Altman: So if it fails, it fails, but I think it's part of being in an evolving landscape is that you try new things while you also assert what makes you distinct and, you know, differentiated. And when you think about this fund, the growth fund,$1.25 billion, are you thinking like a handful of bets for being that prescriptive? Yeah. We all have different answers, which is the beauty of a non-high-level firm. I would love for us to have, as the great J.P. Morgan paper, which everyone should Google and read, the agony and ecstasy of a concentrated portfolio. If that fund is successful, there'll be one or two investments that generate 90 % of the returns.

6:05Jack Altman: So I think it should be four to six, maybe it's seven to eight, but it's not our core fund, which should be more like 20 to 30. Okay. Well, Ev, you are a growth stage investor. You are one of the more recent additions to the firm you joined late last year. You worked for a number of other known brands, Founders Fund, Bond, Kleiner Perkins. I think the audience would love to know something that you've, I'm sure, answered numerous times before, but how does Benchmark differ from those other firms? I think every single firm ultimately is just a collection of the people within the firm and then the way that those people work with each other.

6:44And so you can have really large institutional firms where you have a 50 or 60 person investment team. It's very hierarchical and investment processes are, you know, federated into product groups since you have an app group or a fintech group or a consumer group. And then you have small partnerships. I think very early on in my career, I was very drawn to the idea of a small partnership because you, as a individual and as a team, I think it allows you to have just a higher level of throughput and fidelity in your conversations where you don't feel like you're communicating and making decisions through some Byzantine corporate structure, but you're actually going out as a team, similar to a sports team, as a small group of people going out on the field together and trying to win the game on the field.

7:38And so the small structure was always very, very attractive to me. Throughout my career, most of the firms that I had worked for were smaller firms in terms of the number of investment headcount. And then I think the other piece is just you've got to find your people. You have to find people, I think we say oftentimes internally, not only that you like, but that you admire. And I think getting to know the benchmark group before I joined, and I think this was a very core piece of when we were recruiting Jack as the fifth GP for the current crop of GPs at Benchmark, was it was a group that it was very, very obvious that everyone liked each other and got along very well and worked really well together.

8:14But even deeper than that, it's a group that admires each other and can learn so much from each other. And so finding, I think, that mix of attributes within any team or any firm is very rare. And when I saw it, I immediately wanted to join the group. And I think Jack felt the same way also as a newcomer. Well, Jack, so you are officially the newest member. You joined back in February. And you've got a really interesting path. I mean, you, a year ago, had told the Wall Street Journal that you had just closed your second fund with$275 million in capital commitments in a week's time. You have a hugely popular podcast that I listen to and enjoy.

8:55Why did you join Benchmark? Yeah, I mean, it's funny. So I did that podcast with these guys not that long ago. Like, it was at the start of this year. and you know at you know speaking about the the growth fund and one of the things that's so cool is during that podcast you know obviously we talked about the commitment to being a small fund but i think more than that what i heard was they were committed to like we want to be the first people that the founders call we want to be really in it with people we want to be concentrated and they just care and there's so much in the industry that i think it's tied up in all sorts of other stuff and you know there's there's money and status and all these other things.

9:34And what I felt from the benchmark team then, and, you know, 10 times more as I've gotten to know them so well, it's just a group that really cares about founders and helping companies. And that really spoke to me. And, you know, I did enjoy being an individual, you know, investor, and it was great. But kind of like Ev just said, it's like a rare thing to be able to have a dynamic where everybody that you work with is different and unique and you respect and admire all of them in their own ways and you just learn and it's fun and like right now we're in such a crazy dynamic market that I don't know how I would feel figuring it out you know on my own but having a group of people who are so smart and focused and driven to sort of learn it with and from has has been awesome so for me it kind of just came down to wanting to learn as much like I've only been an investor for a couple of years and I just thought there'd be no better place to learn them with these guys that's great Eric, I also think the audience here would just love to know a little bit more about how Benchmark operates.

10:36So somebody had told me recently that you guys meet on Mondays, you have Monday partner meetings, but there's no agenda that you just kind of like... Zero. Yeah, so that's very interesting and kind of counterintuitive. Jack tried to make an agenda. Yeah, Jack tried to make an agenda. I've got an agenda for next Monday.

10:55How do we operate? It's very haphazard and kind of weirdly arbitrary in terms of how we operate. It's a, one way to think about it is it's just an ongoing conversation. And so much of what you're trying to figure out in a time of rapid change and kind of where the kind of technical substrate is unstable is like what's actually happening? What's becoming possible now that wasn't possible six months ago? where which people are kind of, you know, bending light. And you're just trying to, like, figure that out. And it's not clear. And so there's just a perpetual conversation that we spend a lot of time on Monday literally just talking about it.

11:40Like, just what are different companies and what are they doing and what are you seeing? And, you know, we all are meeting companies throughout the week. And it's just, like, what piqued your interest and who piqued your interest and why? and then what's going on in the portfolio and what are you seeing in board meetings and everything else. You can try to systematize it, but one of the beauties of five people is you don't have to systematize it. You can just have a conversation. And through that conversation, you uncover new nuggets or new questions. And then you go dig in on during the week.

12:10And of course, we're kind of constantly talking on messages or whatever throughout the week. And then every once in a while, not that often, but a few times a year each of us get really excited about an opportunity and and then as soon as you get excited about something you probably have some other people look at it and then you have and you kind of start to build some momentum and you get new questions to think about and then and then you go after it but it I think the way I think about is just it's like a decades-long conversation that is constantly evolving and that only works if you're small it only works if you actually enjoy spending time together because if you don't it would be really miserable.

12:51You know and after this we after this session here we get to go have dinner with one of the very few elite entrepreneurs who's built a multi hundred billion dollar company and so we do that to kind of keep our thinking who we are not invested in and so you kind of keep on on doing that in different ways to to stretch your mind. And you need space to do it too. And so part of not having an agenda and having exploration time is you need space to be reactive to the speed of the ecosystem. And part of staying nimble, part of being creative with our strategy, our fund size, whatever is I believe that we're the best firm to react to any given moment to what our entrepreneurs need.

13:35And so if they need help landing an executive, the five of us can be at their disposal and closed candidates, if they need a really important strategic partnership to land, if they need to talk to a certain executive at a big company, whatever it is, you need space to do that work. And I think that's what we optimize the internal dynamic around, and it's super effective when we can do that. And the founders feel it in a completely different way. Just wondering, since you are an equal partnership, can one person put the kibosh on a deal? What do you do when somebody feels strongly and the others are like, I kind of like this company a little bit better?

14:14Nobody knows. We don't have rules around it. Nobody knows. I actually don't know. So I was waiting to see what someone else said. It's never happened? Yeah. Well, I think to sort of this previous point, it's like because the firm is structured around a low volume of deals, you don't actually want to have all of this rigor. I think if we were structured in a way where our mandate was to invest in 100 or 200 companies per year, then you'd want to use the CRM. You have a CRM. You'd want to have Mondays that were very structured. You'd want to know a very formal voting process. You'd want to have a big team that was sourcing things.

14:53But I think because it's so few and it's so rare, the lack of structure is just a huge asset to it.

15:00Jack Altman: Another dimension of that is I think we're saying yes at the beginning of the adventure. Even in our quote unquote growth fund, the idea is that's still in the first 1%. So if your partner has built conviction about somebody, they're seeing the dimensions of their personality, the gravity of their possibilities. And I think when we go into a room, we don't say yes or no to a deal. we just think about, okay, knowing what I know of Eric, is this a relationship that I can look back on in 10, 15 years? It's not to use a dating analogy, but we all have friends and the partners, and that's not such a great fit.

15:40Jack Altman: And you might point out things recognizing they may still get married. So you tread lightly, and I have been wrong. What are we talking about here, Peter? And so I've been wrong when I've discouraged because I see things that I wouldn't want to work with. But the beauty of a partnership is that we're not judgmental. I think one of the differentiating aspects of our brand is we're not so cocksure to come in and say, winner, loser. It's not Shark Tank. We sort of feel awe, lack of a better term, at all the possibilities, having done the job for long enough to know that we're seeing Toby from Shopify tonight, and I adore Toby.

16:21Jack Altman: We've been admiring him from when he had three people of the company. And I felt that connection and all the possibilities, but it made no sense. This is a guy in rural Canada running a white label e-commerce with no network effect. And over time, what you'd realize as you do more of this investing stuff is that you amplify certain dimensions of seeing something that others may not see. And in a partnership, we try and do that for each other. And so the occasional case where someone comes in that's polarizing, we have the space to—and by the way, the entrepreneurs feel that. If someone in the room doesn't like you, we're not a great partner.

17:05Jack Altman: And what I think we try and create, and I think this is universal for where it's really worked, is that the entrepreneur says it's just different. When you walk in a room and there's five equal people and your sales are filled with the energy of that group's belief in you, then we should sign up and support it. But, you know, it's mostly, it's relational advice, not investment advice. And Shaitan, I'm just kind of curious too. I mean, companies are springing up. I'm not sure actually if they're springing up faster than they ever have, but they certainly are growing faster than they ever have. So I would think it's easier to feel like you're missing out on opportunities if you don't invest with maybe like greater frequency Have you guys picked up the pace in any way, or is it still two to three deals a year for each of you?

17:50No, I think the pace is consistent. I think part of the reality of venture capital in our business is that we are not going to be part of, though we wish we were, we're not going to be part of every successful company, and that's okay. The thing that we want to be part of, though, is there are companies that we identify, we We find that the entrepreneur has some great strength, and we want to amplify that strength, and it's our job to find a way to work with that person. It kind of doesn't matter how much capital they want to raise, or what structure, or where they are, all that kind of stuff.

18:23You just have to work through all that stuff. In any given year, there's going to be X number of successful companies. We would like to have as many of those as possible, with the acknowledgement that we're not going to get 100%. I think part of training this mind that Peter talks about is that as you continue to make these decisions, you kind of refine what works and where you as a partner can add the most amount to that relationship with a founder. And it's even within this group, you know, there are times when one of our partners brings in an investment, and it's fantastic that, you know, one of my partners is really excited about that company and that opportunity because there's a matching of skill, matching of networks, et cetera.

19:09And then I think the beauty of this partnership is that there have been times where one of us meets a company and it's clearly a much better fit for somebody else in the group. And that's passed with such little friction internally. And I think that's actually a very special dynamic. And it's sort of these stories that you tell internally and there's a story of eBay where Bob was on the board, but Bob wasn't the first person to meet the company. And so there are many examples like that where somebody meets a company and pulls somebody else in and says, you know, this really feels like something you might really want to dig into.

19:47And that works out great. And it's a beauty of the partnership, the equal partnership. You know, there's so much, I mean, it feels like the ground is shifting underneath all of us right now. And one thing that I think founders are interested in, or certainly I'm interested in as a trend, is VCs backing competing companies. Your brother was not that excited initially about OpenAI and Anthropik having the same backers, but now they have dozens of the same backers. We just saw sort of a very Silicon Valley-like kerfuffle with Factory and Cognition having Coastal Ventures as an investor in both. and there being some confusion around that company.

20:29But I'm just wondering, has that pact changed? Because companies are growing so quickly and expanding into one another's territory. How are you thinking about that, Eric? Well, I think one of the things that we have an ethos around is we are making a commitment to an entrepreneur. And through that commitment, we're saying, we're going to work with you in this thing and whatever that thing is. And we are working closely enough where it matters, and it should matter to them, as it matters to us. The harsh reality of this world is every company is evolving very quickly. And so you do have companies that will naturally evolve from one thing to another, or pivot, or change, and you are going to get conflicts.

21:13And that's just the reality of the current dynamic. Having said that, I feel this way pretty strongly, which is we are committed to that entrepreneur, and to helping them with their company. And that commitment exists, but we are not product or technology experts. And so if they can tell us anything that ends up being valuable to someone else, they were fucked anyway. Like it's just not, like it just can't be. And so of course we're maintaining confidentiality and like doing those things and have been fortunate to not end up in that type of like insane direct conflict. but for the most part, we want each company to realize its potential and its maximal potential and you're kind of working through that.

22:02So at least for us and especially for the stage that we invest in, which is generally very early, I think that commitment of exclusivity in that area is really important, but things are evolving. There's no doubt about that. And I think people are ultra ambitious in this AI era. And then, you know, as the cost of coding new products effectively goes to zero, you know, founders are incredibly ambitious. They see a surface area and they want to attack the surface area. And so I think it's really, it's probably going to happen more where you start to run into each other. But there's a way to be, there's a way to maintain that relationship and be respectful.

22:44I think it's like if you invest in a company and it's pursuing a core strategy and there's a direct competitor, that's an easy answer. I think over time, if this company expands its surface area and it so happens to be in a place where another portfolio company is, that's sort of like that happens.

23:03Jack Altman: This is, it's like kryptonite. So, yeah, you poke right at the nerve center where we run into our toughest problems, which is smart. But in the spectrum, you have like co-founder who would never work on a competing company to public market stock picker. In our industry, you could distribute their strategies based on that. So for some firms, it's okay if they do five competitors because they're stock picking and they're not causally influencing other than marginally allocating capital. We trend closer to co-founder, meaning if we do something where if it's a conflict, First of all, we honor as truly a deep ethos is transparency to say, golden rule, if you were in our shoes or if you were in your shoes, what would we want to have had as the communication?

23:50Jack Altman: So there shouldn't be the surprise after the fact. And then if conflict does emerge, you really should never feel like you're getting less than because we have another thing that's sort of landed in the competitive space. And that's just an ethic and value system we have. And it would be shocking to me if someone says, no, we divided our loyalties. And that's not what happens. It's, yeah. I wanted to ask. So you mentioned you're relatively new to this, although you've got an amazing portfolio from your all the capital days and your angel investing. Have you made an investment yet on behalf of Benchmark?

24:26Yeah. Yeah, I have. Okay. Yeah. I've made a few. And a lot of them have been recent, or a couple of them have been recent. So they're not all disclosed. But, yeah, I've made a few. I mean, like I can tell you, just in generalities, what's funny is my background was software as a founder, and then that's a lot of what I had done on my own. But since joining here, I've done chips and robotics and infra. So yeah. Great. So I was wondering if there's a lot of pressure on the first deal, because again, there's not that many shots on goal per year. I can't remember who said it, but they did such an amazing...

25:01Somebody asked me when I joined, how was the onboarding? And I was like, it was perfect. There was no onboarding. I can't remember. Either Tathan or Eric said to me, hey, you're going to feel tight on your first one. Don't. You're going to make many investments while you're here. This whole game includes crazy power laws. The odds of it being your first are low. Don't think that way. And just, you know, I kind of came in thinking that, well, you know, benchmark, I trusted that they understood what my shape was as a person, as an investor, and that I was going to just try to stay as consistent to that as I could.

25:41But, yeah, I mean, like, I think in general it's always like, you know, you're coming in, you know, to a group when people have these unbelievable portfolios with, you know, companies that you look up to and all those things. And so, of course, you want to build that. But I don't think I would... I wouldn't say I felt that kind of pressure in any negative way, at least other than just wanting to do a good job. The other cool thing I was thinking about with just listening to Eric talk was it really is... And I don't know how... I've never worked at another firm, so I don't really know. But it really is a group dynamic on a lot of these.

26:12Like the investments that I made, it's like, I don't think we would have won them if I didn't have my partners. I don't know that I would have been able to know how to get to a yes about my partners. So one of the really cool things that I just had never gotten to experience before is it's really not a solo act, which is what Peter joked to me when I was interviewing him on my podcast. He's kind of like, how do you do this alone? And I think now that I see what it's like to do it on a team, I see why he would say it that way. Eric, I had wanted to talk to you about Cerebris. That was an interesting bet for the firm.

26:46you've told my colleague Julie Bort that you almost didn't take make that investment because it was a little bit of field for benchmark so can you talk a little bit about what persuaded you and what that says about your kind of flexibility I guess as a firm better lucky than good that's I think I think the biggest takeaway when we invested in Cerebris in 2016 it was spring of 2016 it was the first round of financing for the company we you know hardware wasn't the thing. AI was obviously in its infancy. Deep learning was just coming around. And I think I was, look, our days are packed with meetings, obviously, and pitches and everything else.

27:28And you're like, we hadn't made a hardware investment in 10 years. It was just a different era in 2016. And we met it and it was like, wow, there's really something there. The founders seemed good. They had a very simple thesis and then mostly everything else I didn't understand. And that was kind of on a Wednesday. We had several other meetings. And then I remember Sunday night talking to Peter. They were coming in again on Monday to kind of beat the rest of the partnership. And, you know, Peter said to me at that point, he was like, this goes against everything I've ever learned in the industry in venture at that time.

28:09And I was like, you know, OK, that that means something. This is like part of the partnership dynamic. And then on Monday after they pitched, and it just relates to this whole thing, after they kind of took us through the story, you know, Peter had flipped. And he said, like, you should, like, do this, basically. And, you know, I think a big part of it is, like, you understand each other's instincts and proclivities. And, of course, that began a journey of lots and ups and downs and many potential deaths of the company along the way to where we are today. and it's far from over. There's a lot more ups and downs to go.

28:45And so, you know, that I think is like a lot of the journey. Now, if we look at it, we have actually like a decent number of hardware investments, including Fuentes and Sunday Robotics and, you know, Jackson New Chip Company and like all these other things. And so, like the world has changed a lot in that era. But I think just the idea of falling in love with a founder or set of founders and an idea and kind of, I don't know, the romanticism of that part of the job is why we do it.

29:16Jack Altman: Part of that, what Eric is alluding to, you think about it as like, Sari Burst represents a giant wafer, a bet on a certain form of inference and all these sort of physical properties, but that's not what happens. What happens is you have Andrew, and his co-founders and their heretics, what they're saying is absolutely unorthodox. And and you see it even today with people dumping on the stock because it's polarizing. That's exactly where we have to be as investors. Because if it's consensus and everyone thinks it makes a lot of sense that that would happen, why is there a startup? Like we are in the area of people in the process of creative destruction of their industries.

30:01Jack Altman: And Andrew's conviction and his The activation of us in response to that was so unambiguous that you had to make the investment. So you think back, okay, it's crazy in every dimension. Yes, it was unorthodox and against all of our principles except for the one that mattered the most. I was just going to say that I think that's one of the actually interesting differences between the very early stage and growth as we've talked about, which is you really are attracted to these, this like orthogonal approaches, like 11 people are saying one thing and one person saying something different. And like the one person is the one that we're like, wait a minute, we better think about that.

30:39And like, did we, like, are we, and, and, and then at some point, like that actually has to translate into like a business and momentum. And, and, you know, that's, and that's where the growth comes into play, which is in some ways, you know, There's obviously always hidden gems, but it is a bit more consensus than the very early stage. As we talk through these companies, that's one of the things that we're working through. I was going to say, what's interesting to me, Cerebrus went out. You guys have done very well by this company. Andrew was here yesterday with his dinner plate-sized chip showing it off.

31:17It was priced at$185. It went out at$350. Now it's back down to 185. Peter, you mentioned that the stock is getting beat up. I'd like to know why you think that is. And I have a second question after that, but maybe who wants to answer that one? One of the things about six weeks before the company went public, I took the... I presented through the company just what it's like to be a public company. And I showed stock chart after stock chart. Core Weave, Datadog, name your company. Amazon, Facebook, and DoorDash. And you look at these companies and you look at them like peak to trough, peak to trough, you look at peak to trough over one year, two years, and it is insane how many of them move 500 % in a year, up and down.

32:08And so the answer to the question is, who the hell knows? There's, but the reality is is you can control what you can control, and then you update the public markets every 12 weeks. And that's how it works. And so, like, the reality of being a pro company, which is a public company, is you need a stomach of titanium. And the employees have to understand that. And the labs will go through this as they will, and others will too. But that's what it takes. and that's part of being one of the elite companies. And we've had lots of experience in the firm and individually taking companies public and experiencing this volatility as board members.

32:53I would say the one thing that you get as a benefit to all the volatility of the public markets is one, you get a much bigger balance sheet, and then two, your ability to raise capital to do interesting things goes way up as a public company. And so my encouragement to this current generation of AI companies is to think about going public early. Because if you just look through the history of technology, and Toby's a great example of this at Shopify, what you can do as a company and how big you can get leveraging public markets is truly amazing. And I think there are many companies that have done it in the private markets, but doing it in the public markets and sort of going through the other side of it and what it lets you do is really, really amazing.

33:40And so we have all the confidence in Andrew and the founding team that they'll execute through this period. But again, like stock price, it's one of those things that you have to prep the company about, which is stock market volatility is something that is the price of being a public company in order to get all the benefits of being a public company. And so if you can digest the volatility over a long period of time and you execute against that, you're going to build something extremely valuable and durable. And so maybe the event doesn't matter that much, but I wanted to ask if anyone in this company still believes in direct listings versus IPOs.

34:17Your former colleague Bill Gurley was a big advocate of finding another way because this huge pop doesn't really benefit the company. It goes to bankers and their clients, and I wonder if you still think there's a problem. I've had the benefit of working on a direct listing. I think maybe of this group, I'm probably the only one who's like worked on a direct listing. It can make sense. Like it can for sure make sense. I think the reality is for this crop of AI companies, it's going to be unlikely because they need capital and they need a lot of capital. And so, you know, at the end of the day, IPO raises money, you know, Cerebrus raised$6 billion, like that matters.

34:55And so I think it's probably unlikely for this crop just because most of them need capital and capital is an important part of it. For a company that doesn't need capital and is going public, a direct listing is great. Chetan, I also wanted to talk to you a little bit about, you've made some really interesting bets. You made a crypto bet, which is not so usual for a benchmark. You also led the Manus deal. I thought that was so interesting when I read about it. Obviously, there were strong reactions. This is a company based in Singapore. Senator John Cornyn sort of said, you know, raised questions about whether a California company should be, you know, investing in this company.

35:37Meta bought it. I also was surprised by that. And then the Chinese government kind of unwound the deal. And the last part seemed like the most predictable piece of that entire chain of events. Why did you lead an investment in that company in the first place? Yeah, Manus was an AI application that was building on top of the APIs of OpenAI, Anthropic, and Google. And at the time, they had really pioneered a way of computer use in a way that in browser use that a lot of people hadn't thought of, and then put it in front of consumers in an application that was easy to digest. and the six co-founders were really spectacular technologists based in Singapore and they were moving at a pace and innovating a pace on top of these APIs that was truly remarkable and so there was a magnetism to that technology and that product that we all felt and so we made that investment.

36:36Meta acquired it in December of 2025. They had gone from zero to a hundred million run rate in eight months, and the acquisition closed, and that's when I stepped off the board. What happened after the acquisition and what's transpired since, we were completely out of the picture. And so, you know, I don't know. But you know, I think it made a lot of sense for Meta to acquire the technology, and you can see their push into consumer AI applications. I think there's going to be a lot more in consumer emerging now that sort of the technology is better understood, the model layer is better understood, how the API should be consumed.

37:18I think what we're making advances in terms of browser use, computer use, agents themselves, and how people can use that, I think it's going to be a really exciting time for consumer. We're running low on time, and I wanted to talk to you a little bit about just kind of the macroeconomic picture. You were a finance major. Companies are basically, it's very expensive for companies to borrow right now. They've exhausted their free cash flow. IPOs are being pulled. We just saw our first AI bankruptcy yesterday with Character AI. Do you think we could be in for a severe correction, like potentially soon?

37:59How are you thinking about this? I think macro is always a bit of a fool's errand to try to predict with any level of precision. I do think that we are in a, the thing that has changed the most since I began as an investor, I think, is the information environment. Like, for example, like Character AI going bankrupt. Character AI was acqui-hired like a year and a half ago. Like, that was the corpse of a company whose founder and management, I mean, no offense to the remaining company, but the founder and the management team of that company was acquired into Google, and it was already sold for$2.3 billion.

38:34And so the leftover remaining assets, then filing Chapter 11, being seen as this, oh, is this an AI chill effect? It shows that the info environment for public equities in tech has been drawn so much into this hyperactive X echo chamber, where if you look at the market today and you see where CoreWeave and Nebius and all these things are trading, those numbers are due to the ARR figures of two private companies that will probably be public in the next 12 months. But the public markets, in many ways, run on X right now, because there's so much capex and there's so much investment that runs through the estimated and projected health of open AI and Anthropic.

39:21And so I think that the thing that feels much less healthy about the current macro more than the actual underlying results, like we're seeing every single day, like our companies are seeing so much demand that they can't get compute. Like they cannot get the compute they need to serve customers that are willing to pay them money for the product at good gross margins. Like there's nothing inherently unhealthy about a lot of the AI ecosystem. What is unhealthy is that we have an immense amount of volatility and an immense amount of sort of like swings in market sentiment based on data points and facts that oftentimes aren't true or are made more exaggerated or hysterical for clicks.

40:02Or you have people that are starting these consulting agencies that their sole sort of purpose is to either be bearish or bullish on the AI trade. And so just the info war and the info environment around the macroeconomic environment has never been more volatile. And that volatility seeps through into the market and gives you the current environment that we have. So I'm not worried about the underlying AI ecosystem as a whole from what we see. But I do think that OpenAI and Anthropoc going public would be very healthy so that we can actually know what their quarterly revenues are instead of having the market swing 5 % to 10 % every time that there's an updated estimate from an account on X that's anonymous.

40:45Last question. Speaking of open AI and Anthropic, they've really almost feels like single-handedly pulled the center of gravity back to Silicon Valley. Do you agree? I mean, are you guys interested in companies that are outside of California and outside of the U.S.? Maybe we'll go down the aisle really quickly. And then, Jack, what do you think? Do you have to be here if you're a founder? I don't know if you have to be here. as a founder, I think it is the by far easiest place right now to get talent and capital and customers in many cases. And so I think it is a big advantage. I mean, I think, you know, probably everybody on here works with companies that are not in San Francisco, but we're also in San Francisco every day.

41:24We're here. So I wouldn't say you have to, but I would say strong, strong bias for our particular setup. Yeah.

41:30Jack Altman: I mean, if you look at just historically, probability density is 90 plus percent that the capital generated return generated has been founded here there are these beautiful stories that are outside of that dense probability distribution you link about today Shopify is a great example their ramp there are other really big success stories the ecosystem effect that occurs when you have a successful company and that that leads to a background of great executives ambitious people the bar of success gets raised. I don't think it's systemically happened anywhere quite like here. Will that happen one day?

42:09Jack Altman: It's possible. But, you know, there's these exceptions, and yet the density is still here very much, you know, crypto maybe it wasn't, but now I think it very much is. I agree. I think San Francisco is a magical place. There's a reason all five of us live here. Our Monday meetings are all in the Bay Area in San Francisco. And so it's a magical place. I'm trying to think of a non-SF-based company that I've met in the last 18 months that wasn't actively saying that they were spending more time in San Francisco. They're either opening an office in San Francisco, they're spending half of their time in San Francisco, or they're planning to move out to San Francisco.

42:48And I think everything that Peter said rings true, where it is like, if you want to be around a group of peers that are going to, like iron sharpens iron. Like you want to be around peers that are going to make you the best version of yourself. And it's hard to think of a city that does that better than San Francisco in the current era that we're in now in AI. Hear, hear. Yeah. So guys, those of you are in from out of town, it looks like you're going to have to think seriously about moving to San Francisco. Guys, thank you so much for joining us, all of you. Thank you for coming, all of you. Thanks, guys.

43:17Thank you. The Strictly VC Download podcast is hosted by TechCrunch Editor-in-Chief Connie Loizos and me, Alex Gove of Strictly VC. Strictly VC Download is produced by Maggie Nye with editing assistance by Teresa Lancansolo and Kel. Thanks for listening. We'll see you back here next week.