EP 60: Scott Raney and Satish Dharmaraj (Investors, Redpoint) Breakdown Venture Capital and Why AI Will Be Bigger Than Mobile

26:22Among the subgroup, it was totally consensus. There was consensus. And then among the larger group, at that time, we evolved to a place where we would go and say, hey, this subgroup has decided to do this deal. And everyone would say, okay, send me the deal memo. So, you know, Scotty, now is your chance to make fun of my deal memos. It didn't take them long to write it. It's a one-page. We should do this deal. Crayon. Yeah. Yeah, yeah. Like a picture of a database, like, you know, those cylindrical things, and then we should do this deal. Yeah. And so we had a date memo, and we just said, hey, this weekend we executed it.

27:02We verbally agreed to a deal, and it was okay to do that back then. Because a subgroup was signed up. Because a subgroup had signed up. And there was a lot of consensus in that subgroup, but it wasn't a controversial decision. Yeah, it was not controversial at all. I mean, I think it was the only controversy on that one was that we didn't get to run our normal process so that the full group didn't get a chance to see it before we did it, which was unusual. But we all felt that strongly about it. And again, we got to the point where we just were trusting one another to make those kinds of decisions.

27:31One thing, I guess, Peter Fenton, when I spoke to him about when he made the transition from Excel to Benchmark, I forget, maybe it was Kevin Harvey or someone said, throw out all that prepared mind bullshit. Because that was Excel's thing is like have a prepared mind and come in very prepared in the way you think about things. And I think Battery had a similar culture of like, let's go as deep as we can in individual sectors and make sure we know every single player that exists in the space. And to some extent, you need to play the game on the field as well and operate within perfect information and be able to make decisions based on what's in front of you.

28:08Do you think, I guess in this case, in the Snowflake case, there were some elements of you had that data about Redshift, but at the end of the day, you had to make a decision based on what the game was. I think it's really important. I mean, maybe it's this kind of a cop out, but I would say that you want to be informed, right? You want to know what's going on in spaces. You want to know that Redshift is exploding within AWS. and that cloud data warehouses have the chance to be a big thing. But on the other hand, I always feel like you go where the entrepreneurs are. There's a reason that we're sitting in the seats that we are and entrepreneurs are out there doing it.

28:41They're much smarter, much more in-depth and understanding of the markets and the opportunities. And so we prepare ourselves in having great kind of purview and perspective on different categories and spaces. But in the end, I want to go where they are and where they tell me they're going. At that point in time, I want to have an open, fresh mind and perspective and lean into understanding that as best I can. But look, if I'm sitting there coming up with like, let's go find the companies that are doing this and doing that. There's some VCs that have been very, very successful doing that. But I think for me, there's a mass of entrepreneurs out there doing amazing things.

29:19I'd rather have them figure out where they want to go and us figure out whether or not we want to go with them. I would say three things. One, he said, you know, entrepreneurs are smart. It doesn't take much to be smarter than Scotty, really. No. You know? So I just want to put it out there. Fenton and Harvey and the story that's interesting, it just brought to my mind. They got to know each other at the Zimbra board. Yeah, yeah. It was interesting. Partway through Zimbra, Harvey hires Fenton. Because Peter was at Excel and was on your board? Yes. And then Harvey was at Benchmark and on your board?

29:51Yes. Yeah, yeah. So they got to know each other at the Zebra board. And then one day, Harvey calls me on a reference. And he says, hey, this is going to be awkward. But who did they both stay on the board? No. So Fenton, Axel had Teresa on the board after Fenton left. But back to the experts on Redshift and Snowflake, my big thing with the early stage team is to always say, do expert calls, but don't believe in them. I personally don't believe in export calls, to be honest with you. I mean, I think it basically – Scotty is right. I mean, you've got to have the info. But insofar as it shakes your conviction, that's the – So whatever he's deciding the first five minutes of a meeting, he doesn't want any data that might – That's what I'm hearing.

30:40That is exactly what you're hearing. But I will say, like having looked at that next round of Snowflake, we went and – I was at Battery at the time, but we did a ton of work, right? And you can talk to a lot of people that said, hey, this isn't smart. And we had a recent example with a company that we ended up investing in the Series C. But at the Series B, we talked to a lot of credible people that said, hey, we're going to fucking crush that. And to some extent, if you get too close to the insiders, of course they're going to say that. It's like a defensive mechanism. If you actually look at this, and I did write slightly more than one page after the crayon thing.

31:14I had like two calls that I did. They were both advising us not to do Snowflake. They're like, hey, Redshift has already won, and they're going to run it over. And when Amazon finds a winning horse, they're going to back up their truck, and this is going to win. Which was the sentiment for sure. There was a long period of time from like 2014 to 16 or 17 that it was like, hey, you don't compete with Amazon. You have to step on your throat technologically. Yeah, and I mean you see that reflected in the margins of that business. Of the early days, the gross margins of Snowflake were really low. I mean, the realm that you looked at a battery would have been a really – it was a challenging one to do.

31:47Totally. Negative gross margins. Negative gross margins, not a ton of customers at some step up in price. That was the one Altimeter ultimately ended up doing. I think that was Iconic, but yeah. No, Iconic was after Altimeter. It was Altimeter, then Iconic. Yeah. I know because I painfully remember. While you might have been involved in the company, I painfully remember each of them. Losing to them? Yeah. I remember all the details around that. But what about pricing deals? Like how at that point, that snowflake round was 60. 60 pre, we are raising 15. So yeah, that was like a ridiculously expensive deal at that time because product is not built.

32:26Pre-revenue. Pre-revenue, pre-product with three engineers and Mike Spicer is the acting CEO. But we had a lot of trust in Sutter and Spicer. Sutter and Spicer, the other thing is we go back along. Mike Spicer and I go back a long way. We were both at Yahoo together. And so we entered the venture business at the same time. You know, we had done pure storage together. And so there was a lot of trust there too. How do you think about pricing deals in general? And obviously it's different between early stage and growth stage. But it's something we consider price, right? For sure. You can't not, especially at the stage we're investing in.

33:04But we also, this is one of the things I'm trying, at times I'll get caught up in. is whether or not something makes sense as a deal, right? And at the end of the day, I don't know if any of my investments have been right or wrong based on the deal pricing. And it's something that, and again, that's something you can say in a 10-year bull market or whatever we had for a long time. But how do you think about pricing of investments and like the importance of that? I mean, you've heard me say this a thousand times. And so I'll tell you one more time and you're going to roll your eyes. It's all about, for me, ultimately how big you think a company can be.

33:36How big the market is, how great the team is, how likely it is that you think that they can be successful and ultimately then working back from there. So you think it can be a really, really big business. Then you're going to think about it from like a dollar on dollar basis and work back from there in terms of just how far you think you can stretch, which is, you know, the exercise that we all have to go through for the most exciting companies. I, you know, when we get into a discussion internally about like at some price, you know, if it was 20 % less, I think I might be interested. I'm always a little bit like, you know that feels to me like you're just not that convicted that this is a deal we should i've come around on that by the way when we saw just how multiples have gone crazy over the last five years i'm not even sure what any company should be worth it was for a long time worth you know 15 times trailing revenue was normal and then it went to 50 times trailing revenue then it went to 100 now it's back down to 10 or something yeah and it's like it's so arbitrary it feels like but if something turns into stripe for example or snowflake or whatever it is like it's going to be okay yeah regardless of that yeah and i mean think about the stripe round we did um this is in 2011 this is before that we were we um were one of the co-leads on the series b stripe and that round was 500 pre and that was i mean it was a crazy round it was a an incredibly expensive round relative to where they were and relative to every other deal.

35:05And a call option. Every other deal that was being done and the way that was structured is we were investing some money up front and then they had a call for additional capital. Was it their option? At the same price, but basically they could take more. And I was just so convinced. I mean, this is one of those meetings where you walk in and I got a chance to meet Patrick Collison and I remember just being completely annoyed in the conversation because at the time I think he was probably 21 22 and he was so much more sophisticated and thoughtful and experienced back to what I was saying before than I was yeah and certainly more than Satish was for sure that you know I was just and then I bet you know John as well over breakfast um and same exact feeling I was like this is such a special team and then you think about what they're trying to do and create the, they want to go after facilitating payments on the internet and ultimately how big you think that can be.

36:01It was just like, for me, the calculus was never based on what's the multiple and all that stuff. It's like, this is just going to be a really massive business and we should do whatever it takes to get in it. So what are the characteristics? I mean, you've been a founder, right? As you think about the successful founders you've worked with, what are the characteristics that you've seen in the, like, is there any commonalities between the different types or does it depend on the market or what are some of the non-negotiables for you with founders? Well, definitely depends on the market. Everything has the context of the market behind it.

36:30Obviously, we hear about these stories where people pivot from, you know, like Slack is a great example, right? But you can't bet on that. So that is the context. Outside of that, I would say the biggest thing for me is are the founders able to attract other great people and hire them and listen to them? You know, so those are two different things because, you know, if you hire them and you're still holding all the strings and you're not, you know, you got to paint the vision but have to let go of the execution, you know. So I think that's what when we talk about people and, you know, we bet on people, it's like, hey, are these people that other people follow?

37:20That's the big question. Yeah. What do you think? Like, what are you looking for? Are there any questions? I would say the same things for sure. I think that it's hard. You know, I get this question all the time, and I don't know. I know when I see it a little bit. It's like just people that are kind of founders that are inclined to action, inclined to get things done, ability to recruit great teams, the ability to listen, you know, kind of willingness to listen, those kinds of things. Insatiable appetite for knowledge. folks that are, you know, some of the best founders that I've worked with are people, obviously, many of them have never been CEOs before.

37:57And it's like, every time I get together with them, they've read another book on leadership, you know, it's like, they just are... There's that iterative learning element of it. Exactly. And it manifests itself. Ideally, you're seeing it in other ways that they're reading books and continue to get better, but also seeing it manifested in ways that they don't touch the same stove over and over again. Exactly. Yeah. And, you know, I think that the founders that I've worked with, that have had the toughest time are the people that are a little static. You know, they just don't, it doesn't feel like they're growing as much as they might need to to grow into that position.

38:27And so obviously our job then is to really try to help them grow. But, you know, the ones that seem to just understand that their job is about every month, their job is different than it was the month before. So they have to evolve and change are the ones that end up being the most successful. Probably I don't believe in books on leadership. Yeah, you don't. You can't read. Yeah, yeah, is that the problem? There's that problem. There's that problem. I can't read. You don't believe in books and leadership? No. You think leadership is purely like an innate thing? It's a DNA thing. Yeah, interesting.

38:56It's back to the instincts. I know. You either have leadership instincts or you don't. You can become a better manager by reading books. Okay, but that's maybe what we're talking about. But you can become a better leader. Maybe that's what we're talking about here. Maybe it's books on management. Yeah, yeah. Yeah, you can learn to manage people better and all that, but I don't think leadership is that. Yeah, interesting. Yeah, yeah. What about - Jack Welch is a great manager, but Martin Luther King is a great leader. Interesting. Fascinating. Yeah, I don't know if those guys have put it in his together.

39:26I kind of get what he's saying. Jack Welch is like, he did a good job managing GE for a long time. Yeah, you look at your ops and KPIs and all that stuff. But you're saying he wasn't a great leader? I don't think he's great. Yeah, okay. I would say he's not a great leader. What would MLK have done with GE? That's what we really need to be answering. What about staying relevant in the industry? You guys are both obviously dinosaurs, but you've continued to stay relevant in the new trends and all of that. People will say this is a young man's game, and so that's maybe why you're dressed the way you are.

40:00Yeah, yeah. How have you been able to stay up on new trends and not actually calcify in what you learned? I just tweet a lot, blog a lot, go on podcasts, and just be relevant. That's the best way to learn, actually. That's the best way to learn. That's what I found. Actually, the business is interesting. As you stay in it for a long time and you work with a lot of different entrepreneurs and a lot of different management teams, right, I think then you build a reputation, good or bad, and then that basically flows around and that's how you become relevant. You know, you're talking to entrepreneurs and they come to you and they ask you.

40:38I mean, like just this morning, there was a deal that we did, I don't know, five, six years ago. And those guys are starting a new generative AI company. And they're like, hey, we wanted to call you guys first because we had a great experience working with you. So there's that. Obviously, we're in the business, so we read a lot. And we hire young people who keep us honest and keep us in the flow. Ride your coattails. Yeah, exactly. But you're right. This is a young person's game. I just think it's back to what we talked about. It's about being curious and constantly wanting to learn and grow. And I think many of the most successful venture capitalists are people that have done the same thing we just described to our founders, is that they're never getting pigeonholed in one place.

41:21They're always kind of thinking about what's next and what's next. I still get a real kick out of when we're finding a new area that we're excited about and really diving in and really trying to understand and learn as much as I can about that and meet as many entrepreneurs in that space as I can. I still get a real kick out of that. And, yeah. And I think one of the things, though, is I don't think that the way that I went about building my venture capital career, I don't think that could be done again in this age. Because you've talked about me not being on podcasts, etc. I've never been interested in building a personal brand at all.

41:53I've actually always felt like at some level, it was, you know, I really, I always wanted to be in the background, because I think the founders and the entrepreneurs are the ones that we should be celebrating, right? But I think, you know, it's gotten to the point now where in so many cases where to build a career and venture, you really do have to build a personal brand because there's so much noise in this space that to get an entrepreneur to spend time with you, they have to understand who you are. Yeah, it's interesting when people ask, like, how did you get into the industry? That's my version of this.

42:21And I'm like, oh, listen, I can tell you the story, but it's not particularly relevant. Like those doors don't exist. Those doors are all shut and they've been shut and they've been cemented over and they no longer look the exact way I did it. and you're going to have to find there's there's much uh different paths that you can get in people are much more accessible via i don't know tweeting or dms or emails or podcasts or whatever it is like there's much more knowledge out there but it's not going to be the same way that that you got in that you got in that i look at the you know the people we hire now and and you know that the way that they approach you know building building their brands their brands it's it's you know it's important to do now.

42:58It's just, it's different than what it was like now. I'm just sitting here getting so scared. I was just wondering, I was just imagining how scared it would have been if you had to build your personal brand on the internet and everyone knew who you were. I know. Maybe part of the reason I didn't do it is because they didn't want people to know. Yeah, yeah, yeah. There's literally like nine minutes of Scott Rainey like on podcasts or videos out there. So we've now like tripled the amount of time of Scott Rainey. And the reason I'm here is because you're sitting there. I know, I know, I appreciate it.

43:26I appreciate you doing that. Another, I guess, thing that was enticing for me in coming over was it does have the management company structure and how each entity set up is different than a lot of firms, right? And so we talked about the different structures between the partnership and the CEO model and the P &L model. We have a pretty clean and different structure than I think most have. And I think a lot of that credit goes back to the founding group that set it up that way. But Satish, do you want to talk a little bit about how we're actually structured? Yeah, I mean, I think, again, a lot of the credit goes back to the founders.

44:02But the way we are structured, well, the best way to explain this is the way most venture capital firms are structured. There's a management company, and each fund pays a tax to the management company in terms of carry. But we don't have that. You can think of us as, especially where the carry flows, each fund has its own carry. So there is no tax that you pay to the founders or other retired GPs in terms of carry every fund. There's usually other firms will have multiple levels. And they'll say, hey, the founders get grandfathered into the economics over time. Or they say, hey, the - 20 % of the carry goes to the management company.

44:47And the management company is owned by the founders or something like that. Here, two things. One is 100 % of the carry flows to the fund managers. And second, equally important, is that we're an equal partnership, where if you're an MD in the fund, you're a GP in the fund, then you make as much money as the next GP next to you. That brings the team dynamic, which is part of our culture, into play. Before we retire, you and I ought to think about forming a management company here. I know. That's right. Some people sell the management company. Let's do that. Scotty. Yeah, yeah, yeah. You can monetize it.

45:24Whenever Logan stops tweeting and broadcasting. I'd love Logan to have to send me a tax. Oh, that would be amazing. Yeah. Why is that important? It's important because basically, as we talked about, being able to operate nimbly as an organization, this allows us to do that. Every fund is a separate company. Like, we literally restart Redpoint over every time we raise a fund. The economics are reallocated. And it means we can hire people in and they're not paying a tax. but also it allows us to kind of change on a dime. If we want to completely rethink the way that we operate, we can completely rethink the way that we operate.

45:59And we do that. You know, every fund we raise, one of the first things we do is we sit down and say, okay, what do we want to do differently this time? And in fact, we bring people on. I think you probably saw this in your experience. I mean, the expectation not just is that you're going to have a voice. Our expectation is you're going to change it in some way. You know, and if you're not, then that's a problem. them. So I love it. I love that we kind of embrace that. I love that's who we are. When I retire, I'm going to wish that we'd done it differently. But I think it's really important. I think it's what's going to allow it's allowed Redpoint to kind of make it through a generational transition and what is going to allow Redpoint to thrive going forward.

46:35You can't just bitch about stuff because you actually have to you have the power to change things. Right. And so you can't just say you can be a whiner. Yeah, you can't be a whiner about it. It's like, well, go fix it. If you have a problem with it, go do it. What are you going to do about it? That's basically what happens every time somebody raises an issue. The question back then is, what are you going to do? You're equally empowered. You're equally economically incentivized. So what are you going to do about it? Yeah. And it's one of those things that you think you want, and then you realize how much work it is.

47:05It's a lot easier just to complain about things and not be able to enact change. But it is, yeah, it's empowering and unique. I do think that trends and stuff is an interesting component of it, right? And one of the things I've my entire career in venture has been mostly riding one ish trend, which is cloud and software by and large. Right. That's sort of the entirety of it. And it's gotten I mean, that that trend to some extent, we became mainstream and 14, 15, 16, probably like prior to the Snowflake investment. But along that way, it started to become pretty consensus. And now we're getting to the outer edges of like just playing the same hits over and over again.

47:42right and so i've been hoping and i think people have been hoping that there would be a new trend and to some extent we tried to force feed uh crypto as an industry down people's throats of like hey here's the new thing out there and we'll see be careful you to find we yeah well we we as an industry yeah we as in redpoint necessarily but we as an industry tried to do that we've talked about those those trends though from a from a perspective you guys have seen the internet thing happened, the mobile thing happened, the cloud thing happened, and now this AI one. And then you've seen the failed ones, the bots and the crypto.

48:15I mean, I don't know if we want to call that failed just yet, but what are some of the other ones that have popped up? Scotty has seen the abacus happen. What is abacus? You know, you don't want to know what an abacus is? It's how we used to add before calculators. All those really old trends. Where do you think, I mean, where does your optimism sit on the AI stuff that we're seeing today kind of pop out? Really, really high. But I think it's going to be like mobile, right? Which is everything is a mobile deal. When mobile first started, it was like, oh, my God, mobile is going to be this. But mobile came into everything.

48:55And then data happened. Oh, my God, data startups. But all decisions are now driven by data. And I think generative AI is going to be the same thing, which is every company will have some component of generative AI. So first of all, it's going to become, you know, it's going to be part of every deal that everyone does and penetrate every industry. But is it going to be completely a new shift in everything that we imagine to have been true last year is completely changed now? Absolutely, yes. I think it's mind-blowing. I mean, if you saw the 30-minute GPT-4 demo yesterday, it's just mind-blowing.

49:35Things are going to be so different. We can't even imagine it. So I think by mobile, what you're saying is like when 2007, 2008 happened, I became a mobile VC. And what that meant was like new companies basically – He left his office. Yeah, exactly. New companies that were being built from the ground up trying to take advantage of mobile data, right? And then the open platforms like the iPhone. and um uh and you know we we a whole bunch of companies were invested at that point in time that were kind of mobile centric and then before you know it though every existing company started introducing mobile as a part of it and became an ingredient but the reality is you know and i've heard that analogy played out i've used it a lot of times but now if we look back mobile really did create a whole bunch of native new applications that were specific you know um and it happened specifically because of mobile.

50:25And I believe the same thing is going to happen with AI. What do you put on that? Like Instagram, WhatsApp, and Uber, and Airbnb? Exactly. And we can go down the list. But all those things were created because of mobile. They weren't an outgrowth. They weren't incumbent companies adding mobile. They happened because somebody looked at it and said, mobile is different enough that I can create an experience that isn't just an extension of something that's already happening, right? And I believe the same thing is going to happen with AI. And I believe AI is as big as the mobile wave for sure in terms of what it's going to mean for value creation for founders and companies here over the next, hopefully, it's 10, 15 years in the same way that mobile has kind of powered a lot of value creation.

51:10And I think that we're seeing all our companies add calls to OpenAI or to GPT-3 or 4 or whatever. We're going to see all those things are going to be integrated into products to actually allow them to take advantage of this. But I also believe that there's going to be, at some point, people are going to sit down and say, the way that we think about enterprise application software, maybe we need to rethink it from the ground up and start all over again, recognizing that AI is going to allow us to think very differently about what these experiences can be like for end users. And I'm excited about it because I think that if you think about cloud really started about 2007, 2008 when it really accelerated.

51:48AWS was a real driver of that. But then that's when Salesforce and others started to demonstrate, hey, enterprises will consume cloud-based applications. Mobile happened about the same time. For 15 years, we've been investing off of those waves. Even the data stuff we're doing is really an outgrowth of the move to the cloud. And it was getting harder and harder for us to find things that we felt like had a lot of running room that could be had unbounded upside because those themes that were they were starting to get a little bit long in the tooth and um i think ai has the ability to be this thing that is the wind in our sails here for for a long period of time yeah that's the way i sort of uh thought is that the internet changed every business like totally it changed uh the venture capital business quite literally we had to have a website right and it changed restaurants around And this feels closer to mobile in the sense that maybe it's – and the equity value created there was tons of net new stuff.

52:43Mobile didn't change every single business, right? We didn't need a mobile app in the same way. It changed how we operate internally but not how we necessarily go to market as Redpoint. But it did create a lot of independent equity value. It also created a bunch to the big incumbents as well. But it's interesting to hear how many people that were cynical of crypto are now optimistic of AI. You can see real-world applications right in front of you and the ability to kind of monetize. And I do think mobile – I think what's happened is the iPhone has just plopped in everybody's lap over the last couple months.

53:20It's literally that big of an event if you think back when the iPhone was introduced. That's just kind of fallen in everyone's lap here. And now we've got this blank canvas to think about what we do with it. And it's going to be really exciting to see. Not just that. With ChatGPT, you can go to any other person and explain what it is and show them a demo and they get it. And they can go explain it to someone else. You could never do that with crypto. And how do you think he's writing his deal memos now? Yeah, exactly. Now they've gotten a lot better. Yeah, honestly, they're now a page and a half long.

53:55So that's really interesting. Yeah. Yeah. And he's got like really real graphics and drawings in there now. It's really amazing. What about the fun? Mid-journey, baby. What about the fun dynamics like in the industry as well? So now we have these big trends and we've seen funds grow. I mean, you joined Redpoint in 2000. 2000. 2000. So you saw the tail end of funds growing. Was that the peak of the - Yeah. I joined the venture capital industry the day the NASDAQ peaked. Okay. And it took another 15 years or whatever. Ever since Scotty joined? I know. Well, it came back. There were five years, whatever, 2016 to 2021 that I kept going up.

54:33And then I started going back down again. But we've had a proliferation of funds. We've had a proliferation of tourists kind of entering the industry. We've had the solo VCs and all of that stuff. Now it feels like we're going back the other way a little bit. But we've generally tried to stay smaller than certainly our peers that have been around for as long of time and with some of the same companies that we're in as well. How do you guys think about fund composition and the state of the industry now? Yeah, I think a lot of it, honestly, is institutional knowledge and history that I frankly benefited from.

55:10I think during the dot-com days, we, Redpoint, you know, raised all these big funds and realized that, hey, that's not how we make a great multiple on funds. And what we really want to focus on is a multiple on the fund. And if you want to make a 10x fund or a 15x fund, you know, you've got to have a small-sized fund, not a big-sized fund. And I think that institutional knowledge has been hammered into our heads from the dot-com days, which then I inherited. And so we always think about it from, hey, fund-on-fund multiples. The math just doesn't work when you have that big a fund to create a 10x fund or outlier funds.

55:54Yeah. Yeah, and I'll put a fine point. I mean, the last three to four years, we've seen a lot of really gross behavior, just these massive funds being raised. and people investing over the course of a year, clearly chasing FOMO, enabling a lot of bad behavior. Frankly, it's hard for me to sit here and say, hey, giving founders a lot of money at high valuation is a bad thing. But the bottom line is I think we're seeing that it wasn't a great thing for these companies right now. A lot of companies are having to go back and actually think about how we really build the business and make sure we're building a good business, one that has the ability to be efficient, where we can't just use money to kind of plaster over all the things that everybody has to do when you go through building companies.

56:35So, you know, I worry about the industry, you know, I worry about all that money sitting out there as a lot of it still is. We still have a lot of folks out there that I don't think think about the long game as investors who I think focus very much on trying to make a quick buck and not really about company building, but really about how do I put as much money to work in a shorter period of time to generate as big a return as I can. And, you know, I certainly hope that what happens over the next few years is a lot of that goes away. I certainly don't want to get to the point where companies can't raise the money they need to be successful.

57:10But I'd like us to get to the point where, you know, the dynamics in this industry are one that are really focused on let's build really great companies and everything else will work out from there. We gave money back, right, in Redpoint 2. Excel did, Battery did. There was a handful of firms that did as well. Do you think that's something we're going to see or people? We already did see it, right? I guess Founders Fund did the cutover. Yeah. They shortened their early stage. The exact way they did it, I think, was they had raised like 1.9 or something. And then they said, we're going to cut it actually at 900 and then roll over that next billion to the next fund in some way.

57:50So it was a little different, but similar idea. It might happen. It might happen. I don't think it'll happen quickly. I think part of the problems is these firms hire a lot of people, have an expense structure that makes it difficult to do that right out of the gate. And I've heard stories on the opposite side, and I think we've talked about this, where people post the market correction, firms going out, raising really, really big funds, very, very large funds, not getting all the way to this massive target they had. Instead of saying, we've got a really big fund now that looks great and we're going to be able to deliver a really good return, we're going to keep fighting until we get that extra billion dollars into our fund because every fund needs to be bigger than last because that's the way that we operate.

58:33And I think that is such a distorted way of looking at the world. I think it's such a cynical way of thinking about our industry and about what we're trying to do here. And I think it's greed, honestly. Greed and ego, personally. So that's the element of the industry as it stands with these big funds and the deals and all that. I do think the pendulum swung back from we've seen founders had all the power in all these rounds, right, where they were getting multiple term sheets. And now it's a little bit more of a healthy balance where, for the most part, people aren't giving large secondaries to founders to try to get into deals and all that.

59:09We did, I guess we're recording this a week after all the SVB stuff played out, right? What about the implications for either with regard to how different people acted in sort of a zero-sum way, maybe on Thursday of pulling money out, or how different people acted very publicly in what might have been somewhat inciting of other bank runs that we potentially saw on social media over the weekend? I know you guys don't spend as much time on social media as I do, but I will say the sentiment on venture capital, it feels like kind of took a lot of political goodwill was spent over the course of the weekend, right?

59:49And I think there's been a lot of good work that the industry's done that we haven't done maybe as good of a job as we should have of getting the message out of things like Moderna and how big of an impactful institution that was over the course of the last couple of years. Or some of these other, I mean, Zoom, quite literally, like venture-backed startup changed the way we process the pandemic. And saved us during the pandemic. Saved us during the pandemic. And so I think there's some branding issues that exist with venture capital. And I do feel that we're moving in a direction if we don't figure out how to push back that there's this social pariah.

1:00:25Someone wrote an article calling VCs parasites that was run the other day and recommending euthanasia, which I'm told was a Keynes economist reference and not a actually recommending death of Victor Capitalist. I think he was really talking mostly about VCs that do a lot of tweeting and me. That's right. I think specifically me especially. But what do you think about that? I mean, we're in more of the spotlight than we've ever been. And we've obviously embraced it in different ways. You guys less so than I. We have done a really, really poor job so far of bringing out all the good things that tech and venture capital and innovation and entrepreneurship jobs.

1:01:04Jobs, I mean, like if you're an Uber driver or DoorDash driver or Instacart delivery, you know, there's so many hourly jobs. All of them are powered by the innovation that happens in the valley. And we realized we have no friends on the left, no friends on the right. you know where we are a prior and we got to do a better job of uh of blowing our own trumpets a little bit and talk about the values that we we bring and the value that we bring um better and and honestly have better connections in dc and things like that which we didn't have and uh a band of vcs came together as you know and we started tweeting together and and a lot of great firms, GPs from a lot of great firms.

1:01:59And one of the things that we're thinking about is, hey, how do we affect this thing that you're talking about? And how could we be better understood, honestly? And it's not just venture too, right? I mean, to some extent, like Elon Musk or whatever, some of the big personalities in tech can come across as assholes. Well, yeah. I think that's one of the things I was just going to say is I hope part of what happens here is that we, as an industry, take a step back and make sure that we're behaving in a way that actually warrants us being given the benefit of the doubt. And, you know, I'm not sure that we always do.

1:02:31So I think there's hopefully a little bit of introspection that happens post this too, to help us understand how to make sure that we can rebuild the political capital that I think that this industry deserves. It's not just venture capital. I mean, I think when we talk about VC, I mean, really what we're here to do is to help these founders and these entrepreneurs succeed, Right. And if we're not here, that it's very difficult. Venture capital doesn't exist. It's very difficult for that innovation to happen. But that's ultimately what we're in the job of doing. And I think, you know, as long as we don't lose sight of the fact that really our job is to make them successful, then I think we're going to be in good shape.

1:03:08So I have a question for you. Yeah, give it to me. All right. So you're you're of a different generation than the two of us. I'm curious how you think the differences between the way that you see the venture ecosystem, you see the future venture capital, and maybe the way that Satish and I see it from our standpoint. Do you think it's different? Do you see it differently? I think that a lot of the trends that we saw over the course of 2020 and 2021, we saw when we talked to our LPs or talked to people in the ecosystem, There was clearly this mindset that we were shifting to a haves and have nots.

1:03:45And you needed to get big and you needed to have a single platform and a whole bunch of services. And I think it was kind of Andreessen Horowitz kind of led this one end of the spectrum, right? Or you needed to be really small and really specialized on the other end of the spectrum. And when you haven't been in the industry as long as you all had been and you just hear that from everyone, it makes sense, right? That's the way the banks played out. That's the way Hollywood agencies played out. And it makes sense that that is a way that things kind of polarize in some ways. And so I think I always had in the back of my head, well, maybe that's right.

1:04:25Maybe that we should move in one of those two directions, either get bigger or get smaller. And left to my own devices, I wonder if I would have been as disciplined in our approach or what made us special. And would I have chased that shiny object a little bit more? I think now it's become obvious that that isn't the case or isn't the case in the near term. And so I appreciate you guys keeping me and us in line and like consistent with our knitting around time diversification and moderate fund sizes in the grand scheme of things compared to other people. So I think all of that is something that I don't know if I ever went full on in that direction that I actually truly believed it, but it was always rattling around in my head.

1:05:13And I think both of you kind of kept me consistent or kept me from jumping further in that direction, in that line of thinking. Otherwise, I think there is this element of craftsmanship to the industry that still exists with founders and the ability to work with them and partner with them. and that enjoyment of it. And I think we've definitely seen more and more finance people just purely get into the industry and having grown up in finance. I certainly recognize that. There is still this artisanal quality of helping founders, and I think that's a real tension that sort of exists within my generation a little bit is how much are we partners to founders and helping them shape their business versus pure capitalists and we're just an earlier stage hedge fund in some way.

1:06:02And so I think that's a tension that our industry wrestles with in some ways. And I think we're going to continue to wrestle with the artisanal versus the pure capitalist quality of all of it. And one of the ways I've heard it, I think Ben Thompson talked about venture capital being an iterative game in a lot of ways, right? In that you're not just solving for the near-term solution to any problem. You're sort of playing an iterative game that adds up over time. And so it doesn't make sense to make a zero sum decision along the way. I think as more and more finance people have entered the industry, we are seeing more and more zero sum and less iterative game mindset around this.

1:06:43And so I don't know what the big implications for that are, but it could be, I mean, you're seeing elements of the fee chasing and the all like the industry looks different than it did 10 years ago. And I think it's going to look different in the future, maybe not for better. Maybe that's some of the things I've alluded to in our conversation today, like I feel like the old guy saying, kid, get off my lawn here. But I do feel like we've moved away. We've lost sight of what we really all are about as an industry. We're really about helping entrepreneurs do amazing things, which is build companies.

1:07:12It's the hardest job in the world. And, you know, figuring out how to help them and being focused as a group on that is your primary goal. And it does feel like there's so many people in the industry which have lost sight of that. They really are just about how do I get all this money to work? and generate as big a return as I can. And I certainly hope a part of the outgrowth of what's happened over the last couple of years is we move in a direction where people get back to the core fundamentals of just being focused on helping build great companies. Tell me if I'm wrong, but a lot of the stuff played out in 2000 to 2001 probably similarly and then it retrenched and went back to...

1:07:51Yeah, I mean, there were a lot of like... That happened in such a condensed period of time. This happened over, you know, there was like a 15-year bull run, right, that just kept adding on and adding on. That happened in a relative, you know, from 97 to 2000, 2001, right? And there were a lot of tourists who came in but didn't have a chance to really kind of infect the industry in the same way. And they definitely left. And, you know, we were back to kind of square one, right, and kind of building up from there. This time, since it's happened over a longer period of time, it has changed the industry in a more fundamental way.

1:08:26And, you know, I don't think we'll ever get back to where we were. And we probably shouldn't because, you know, we could talk about what's changed in the venture industry over that time. But one of the things that's happened is obviously this is a much bigger industry than it was in the time that, you know, in 2000 when the Internet bubble happened. That felt like it felt like we were the center of the universe. but you can see those stats like how many of the top 10 was valued companies or tech companies back there it was maybe one or two, now it's probably eight or nine, right? The industry's grown up it's definitely matured, it's massive and as a result, obviously venture capital's going to change, it's going to evolve with it, but maybe it's changed in ways I think we need to get back to basics.

1:09:08Logan, I have a question for you Yeah, give it to me. Who's your favorite partner at Red Point. Besides you guys or including you guys? Just pick one. Pick one? Including us, of course. Yeah. It's so hard. How do you pick between your mother and your father? How do you define favorite? I'll let you guys decide which one I use my mother and which one's my father. You're an entrepreneur. You have to pick someone to be on your board. Who are you picking? Come on. Come on, man. Gosh, these are the hard questions that I think that you don't have to answer. Yeah. He doesn't want to answer here because it would be Andy or Eric or somebody like that.

1:09:40Yeah, exactly. Exactly. but okay who has the best hair well i that's me i think that's you yeah i would give that to you for sure what what am i missing yeah dude yeah your eyebrows are amazing glistening

1:09:57so that'll do it for the 60th episode of the logan bartlett show thank you to satish and scott for finally coming on thank you to rashad and justin for their efforts with this episode and thank you everyone for listening in a fun episode to finally do something a little bit different with a look inside our partnership. We look forward to seeing everyone back here next week on the 61st episode of the Logan Bartlett Show. Have a good weekend, everyone.