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23:30You want them in the round. And it costs very little to have Harry or David in like for 500k or a million.

23:35Harry Stebbings:Are you really not tempted to raise more? Every single constrained fund, including Benchmark, historically the central figure and discipline in venture, it has raised a billion and a half growth fund. I was with another great growth fund that is very disciplined as well. But we're raising billions too. everyone who was, it's like, no, we realize the game on the field is you need money. Are you really not raising more? It would be disingenuous to say to you that we don't have the discussion, that it isn't attention, that we go back to it. It's hard to be contrarian. When there's so much money going around, it's hard to say no.

24:12And then here's how we come out is the GP has been the biggest LP and we're greedy for returns, not management fees. What percent of the fund are you now? We're certainly in the last few funds, the largest LP. There's no LP that is bigger than the GP. We're seriously aligned with our LPs, but what are we seeking? And this is the answer to your question. It may be wrong. Literally, if you do the analysis, you may go like, that was crazy. You left so much on the table. We've been very disciplined about strategy and very disciplined about DPI.

24:46Harry Stebbings:But if I just look at you, I'm sorry, I'm playing out devil's advocate again. And I'm just like, you know, you had Coupang, you had Uber, you had Trade Desk, you've got Shield, you've got Suno. Tuck on another three to five hundred million dollar vehicle and keep going. I'm sure you knew Mikey was amazing. I'm sure you knew TJ was great. I'm sure you knew that these were great. Surely that is a conversation that has rationality. Because it's a rational conversation, it comes up. Yeah. And then you come back to saying, OK, who wants to do this? You're an offsite with a partnership and says, who wants to do this?

25:19And I go, oh my, like I love the early stage, right? Like I kind of may do it, right? And by the way, I am an opportunist as well. I think of myself as some kind of value investor. So the interesting times for that for me have been when nobody's funding. Why? And I think that person's great. Or it's a consumer play. And I know consumer multiples are lower, but this is a internet acquisition device. and these founders are better at acquisition. So it's not in the hype, hype, hype, go, go, go. I'm kind of immune to that.

25:56Harry Stebbings:I'm in pain. I love you so much because you're so much shorter than me, but I'm just like, the market can stay irrational longer than you can stay solvent. And when I look at like a Wix today, trading at 2.1 billion on 2.1 billion of revenue, it's a great example where like, there's obviously irrationality at play, but it doesn't matter. The market's the market. And if consumers, say, is getting the pricing that it's getting, I can't change that no matter how good the acquisition machine is. And so I don't fight the tide that's against you is my thesis or ethos. I can swim in the swim lane that's swimming in your favor.

26:34Harry Stebbings:Am I wrong and I'm just missing a contrarian beat? No, there's so many ways to do this. And people have done so well. There are big funds that have returned very well. right? You've got to be in the right vintage. But if you look at like Thrive or A16Z, they've had some big funds that have returned very, very well. A little less since 2020. Like if you look at the DPI analysis, the jury's out from 2020 onwards. Now, of course, if you're like Josh and you're in SpaceX and OpenAI, that's going to be like the most ridiculous fund. But wow, you are in the most rare air. And then there's just something that's competitive and unique and it is economically irrational potentially, but is I was in that company.

27:23I was first, I wrote the biggest check. Somehow for me, being competitive with me, that is the biggest thrill. I was with that founder from the beginning and we literally reversed the truck and gave them everything they wanted. And by the way, does that mean that we're not writing three,$4 million checks now? We are, right? Because if you want to get a percentage ownership in something that you think is extraordinary, you're writing much bigger checks than we wrote before. So the fund is going faster than it used to.

27:53Harry Stebbings:What is your average ownership now? And has it gone down over time? Because I look at ours and our biggest mistake, and I can look at Deal, 11 Labs, I can look at Granola, and StarCloud, Fractile, could have done them all, but would have had 1 % to 2%. And all of them we turned down purely for ownership. that is hundreds and hundreds of millions of lost returns for ownership. I've never thought about that. Bugger. I mean, all things being equal, I'm a capitalist, right? So all things being equal, like I'd love to own more upfront than less. But it wouldn't be the reason you turn it down. I've never, I've never turned it down.

28:31Never. And Mikey, I wanted to give him every last cent. You know, reached a point where he said, look, that is the dilution I'm willing to take. I'm not willing to take another iota of dilution. We gave him what we gave him, which was literally every single cent in his first round. We showed it to other people, by the way. I showed it to you. Thanks, David. We weren't going to bring that up. And then when Matrix led, which it wasn't a popular round. Lots of people said no in that round. We asked every last cent. But would I have said no to Mikey because of percentage ownership? Like when you meet the right people and you're all in, you get what you get.

29:10Harry Stebbings:And so you will do the one to two percent and you'll take it even though you can't size up in next rounds. Well, you know, again, I think pro rata is almost like the original sin. But if others have it, I don't think that we should be excluded if others have that pro rata. We are seeing rounds now where there isn't pro rata for anyone but the lead, but the most major share. So it's not a pro rata for all major shareholders. It's for the lead shareholder. I'm not sure I agree with that either in this environment. I kind of think that there should be a universal approach to treat your investors equally.

29:44But I think pro rata is generally not great for entrepreneurs. It's a call option against you. We feel like we've had to work every time to put in a bit more money. We've never, ever led another round. So we have this view of like it would be negative correlation bias. It would be unfair to everybody if we didn't be somewhat kind of uniform.

30:04Harry Stebbings:Do you think it's harder than ever to accurately concentrate dollars effectively, given the rise of such preemptive rounds? We've had them where we haven't even wired the money, and there's a new term sheet. At different valuations. Yeah, and that happens quite often now. Is it harder than ever to concentrate effectively when it's just so fast? Some kind of framework is really, really necessary. and I credit my partners over the years with that, of saying we may be writing bigger checks, but above that post-money valuation, it's really not our opportunity anymore. And you can look in the rearview mirror and say, man, I should have done Uber, I should have done Shield, I should have, huge kudos and power to the people who did.

30:49But a framework lets you act very quickly. And I would say credit to Eric Paley in this case is he always created some kind of discipline. So the post money went up and up and up as rounds and the momentum and the size of money and the environment changed. But we would never lead another round. We've never done that in our entire history. So we haven't been preemptive and we haven't been like, we'll lead your series A and we like you more than others. But our ability to participate has always been there.

31:19Harry Stebbings:Peter Thiel said before, if he'd just done every round that anyone else had done at an up around and it was a good brand, he would have done much better. Have you found that to be true? Given the era, like this has been the golden, golden era. It's probably from a data-driven approach, it's probably true. Like if we'd followed on in Uber, Coupang, Shield, you name it, if we just followed on, probably the data would show that we've done pretty well. Our view would be we would have had to have followed on in everything. And I think that the absolute return would be better. I don't think that the multiple would necessarily be better on the fund.

31:56Harry Stebbings:I'm not being rude. A framework's not the enemy of this venture cycle. I think it's so easy to be rigid in your mentality around, oh, we won't do anything over a billion. But I know you're going to absolutely wince at me here. So are you ready for a real shiver? I think a billion dollar valuation is the new series, eh? And you're like, whoa, Harry, whoa, whoa, kiddo, calm down, listen to the facts. We used to do a 50 million post and hope it would become a billion 20x without dilution, like blunt. Now you enter at a billion and you hope it becomes 20. You know, we have Mercor at 20. We have Cognition at 26.

32:29Harry Stebbings:Cursor gets sold for 60. Sold? This is liquid. Well, maybe a billion is the new Series A, no? I think you may be looking at the top two or 300 companies. Is that not our business? I don't think so. I think that that's the momentum business. And I think knowing how and when to get out quickly with some of those really, really matters. and that's not really my business. So my business is value is getting involved early and trying to find value opportunities. There are times again, where it's an intoxicating founder and being on that journey together, but I'm not sure that those are your fund returners.

33:06The difficulty with some of those momentum assets is it was what we were talking about earlier is you've got to be able to like run for the exits when you can. It's exactly what you were saying is you didn't think that founder was all that great, or you thought that the valuation was so far ahead of the reality of the business. But you're asking a question, you're asking a momentum question. And is it all momentum? I've got to be careful not to be too anachronistic in this because we have invested in momentum. It would be so disingenuous for me to say that we haven't. When you say that, what do you mean we have invested in momentum?

33:41Our lead joke tends to be when this has gotten across a certain point, like we're out of here. and credit to Eric at a point for going, like we've captured 80 % of the value. We could capture another 20 % if we did Uber at Series A or if we did Suno at Series A. And by the way, it's not just on paper. I think there would be buyers for that position. So in hindsight, I look at that and I go, like, were you anachronistic? By the way, we didn't even seek to participate in that round. We kind of go, we built our ownership position and we're done. Like this is not the kind of investors we are. We're looking for the next seed stage round.

34:16And I think, Harry, what we've done is we've drunk the Kool-Aid to such a large extent now. You and I are so different that you're going, this is hot. Let me go, go, go. I'm going, I've got a smaller fund. Where else can I really X my ownership versus, you know, getting a 5X or 10X? But of course, the environment makes you look quite silly in retrospect. The question is, how long does this environment go on for?

34:41Harry Stebbings:And it's also about how, and this is the, you have unbelievable returns and you've made a phenomenal amount of money for your investors. But the quantum of cash that you move matters. And Josh and Elad and the multi-stage funds moving hundreds of millions and billions. You make a larger quantum of cash. And so I get you with that in terms of your multiple goes down when you lead the Series A. Look, there's so many different ways to play this. And I think when you talk about Josh and, you know, a handful, they've killed it. They've absolutely killed it. A lot of LPs, very wrongly, I think, don't like the large platforms and always just come back to this very kind of, I think, basic rudimentary thought that as you scale fund size, returns always get worse.

35:26Harry Stebbings:Always. Whenever someone says always be careful. But I think with the outcome expansion that we've seen, Cursor at$60 billion, trillion dollar companies in a matter of years with OpenAI and Anthropic, you will see venture returns with mega platform sizes. Do you agree? Largely, no. So largely, I would say, who are their LPs? Who are they working for? And in some of these cases, not even endowments anymore. It's sovereign wealth funds. And sovereign wealth funds and public investment corporations are looking for IRR. They're not measuring this in how many times do you X the fund. Doesn't mean that A16Z and Thrive haven't Xed a few of their funds really, really nicely.

36:05Again, subsequent to 2020, like the TVPI is there, and in some cases they're on steroids. The DPI is less there if you look at the actual stats. But they're working for these sovereign wealth funds, and they're giving great IRR. And some of the endowments, some of the biggest endowments are like rounding errors now. The question is, who are you working for? And I, again, obsess with this alignment with the entrepreneur. And we're working for ourselves as well. And we're working for DPI. And the bigger we make the fund, the tougher it is on the DPI. What am I doing this for? Fund after fund after fund.

36:41If we look back on Fund 2, it's all about applied AI. I mean, that's really what the fund, if you look at the winners in Fund 2, it's Shield AI, which by the way, in 2016 was called Shield AI. It's Vocada. It's Whoop. Now, all of these things are commoditized. All of the hardware is commoditized. Video cameras are commoditized. Drones, I mean, you can buy a drone for, you know, forget DJI, you can buy a drone for$20 now, right? $50. It's about putting AI around these completely commoditized platforms. It was 10 years ago, but it wasn't the theme. So the one thing that you're talking about is momentum around a theme.

37:20And I'm going, in 10 years time, or in five years time, there will be a new theme. The job will have been to get into that theme ahead. I don't even know what it is. I hope I've got some on goal. And those weren't the expensive ones. Those were not, they never are. So using AI is really important. I guarantee you, all of these things are called applied AI businesses today or physical AI, physical AI. The job is to be in there five years or 10 years ahead.

37:48Harry Stebbings:And it's not where the momentum is. It never is. When you look at, you said that kind of fund two, and you said a couple of names there with vocadas and your whoops and your shields, how concentrated are the returns in your funds? I spent time with Honam from Altos, and he's spoken about the return concentration with Roblox. Mind-blowing to me. How concentrated are yours, and what lessons do you have from that? The amazing thing is they've been way less concentrated than you would expect. Look at Fund 2. Forget Fund 1 now. Fund 2, Vokada, Shield, Whoop, PillPack. In and for the most part, one of or the single largest investor in the first institutional round.

38:29It's not concentrated. If you look at Fund 1, we always talk about the trade desks and the Ubers and the coupons. Fund 1 still has Airtable in at the very beginning, challenges in the SaaS environment, but Simply, Simply is the biggest piano teaching and music instrument teaching company in the world. SeatGeek. Haven't sold a single share in SeatGeek. That's still in fund one. Why haven't you sold a share in SeatGeek? I think it's spiritual at this point.

38:57Harry Stebbings:It's a religion. Beneath the shirt, you've got Jack's face, right? That would be an epic. I did that. I did that at my LP meeting. That would be very funny. Before Jack, Jack and Mikey both presented and I literally said to them, get me t-shirts. and I had ripped open my shirt. But I'm actually worried about this, which is, you know, and I'm not positioning this at Airtable at all. I think Howie's wonderful and brilliant and a brilliant product team. But like you're seeing the cannibalization of leaders in a space like Airtable respectfully and like Sneak, the cybersecurity company, which in a similar vein is going through challenging times too in terms of growth rates and everything involved.

39:34Harry Stebbings:Well, there hasn't been a liquidity event, but the cannibalization has already started. It's like the innovation cycle's taken steroids and gone too quickly to allow liquidity events to even happen. Does that worry you too? I mean, by now, Harry, it's very hard to play around with Claude or something like it and not have the revelation that we've all had. But then you look at some of these SaaS companies and you look at the SaaSpocalypse. When we were on the Olo board, when it was listed, we'd look at companies like Viva, which is, I think, at a$30 billion market cap now. It's come down at least 50 % or more.

40:11And we'd go, this is the most perfect, like, we want to be this company. It's hard not to look at some of that market cap erosion and go, is the baby being thrown out with the bathwater? And it's about the last 5%, I think. And I would say, if your Airtable and Viva or Olo look very different, the more embedded you are, like the more difficult you are to dispense because real time, thousands, billions of orders are being run in your system or mission-critical biotech research is being run in your system, the more embedded you are, I think the more overdone that SaaSpocalypse may be. The less embedded, clearly, the easier you are to kind of turf out and play around with Claude, you name it.

40:54But I think we're underestimating that last 5%. The contrarian in me, this is not what I do, would say buy a basket of the top SaaS stocks that have all lost huge market cap, you're going to do okay.

41:05Harry Stebbings:You are, and Ryo Driscoll, who we do the show with every week, has done that. And I put my money into Palantir and said, I'm a momentum surfer. I did better. And that's the hard point, which is the opportunity cost of cash is so real that you can be in one and try and be smart, but you're probably right long-term, or you can just be momentum trader, and you'll be right actually in the short term. And if you can time it well, it makes a difference. The difference between, in a way, between our styles is every single company I invest in, and it comes back to concentration. Every company I invest in, I invest in with the hope that it could be another Suno or Uber.

41:41I literally do. I don't invest in companies and go, I'm investing in you, Harry, because I think you can be a 10x outcome. I don't do that. You don't? No. Wow.

41:50Harry Stebbings:Every company we're investing and we think, wow, this could be ginormous. Jason Lampkin just told me a very simple one. He's like, I'm not smart enough to predict the future. What I look for is, can I get a 3x on my next funding round? And if I can get a 3x on my that is funding around and I really believe in a great entrepreneur CEO and a great CTO. Amen. So we use the same logic, but it's always been 10x. I will not invest in this if I don't think, if I'm not sure that there's a 10x. We have at our team meeting, I love it because dot, dot, dot. If you can't complete that sentence, you can't invest.

42:23That's how we start the team meeting. That's how we start talking about a portfolio company. What's your greatest ever answer to that? So in more recent times, I've gone, I love it because I'm obsessed with Harry. Every question I ask, I get a better answer than I expected. Every time I press, there's no evasion of the facts. He never says to me, oh, we're the only one in this business. He always says it's so much harder than you think it's going to be. It's so much tougher. And like this person's leaving me. And I love it because they're obsessive. They're all over it. They're so deep in this.

42:57And I just can't get this out of my mind. I will not say I love it because of valuation. By the way, we've always come to valuation last. We've always gone opportunity, market, founders, founders first and foremost. It's in our name. And we come to valuation last. And I cannot say that every single time we've invested, we've gone, this is a perfect valuation. In fact. Rarely is. No, it rarely is. The best deals, both sides feel uncomfortable, I find. Of course. Of course. Exactly right. By the way, you can go, I love it because of insight into the vertical. I love it because of an edge that nobody else can match in a commoditized business.

43:34I'm writing this piece on Nepo babies, and I'm going, I love to fund Nepo babies. What? I'm writing this piece right now.

43:41Harry Stebbings:Why do you love to fund Nepo babies? So TJ Parker, working in his dad's pharmacy when he was 15, 14, 16, he has got more edge in that vertical than he knows. Mikey comes to voice AI, to music, to audio, right? They've come out of Kensho. That's all they did at Kensho. So you take Mikey and Georg and Martin Camacho. That's all they did. Martin was the CTO of Kensho. Now, they're not the Nepo baby, but Evan at Rebar. So Evan at Rebar is HVAC preparation and HVAC quoting. there are over 100 ,000 mechanical engineers in the US that are making 100K each at least when they graduate. And all they're doing is sitting with this blueprint process so that they can quote on new commercial.

44:32And Evan's sitting there, and by the way, he did work for his uncle's company that was rolled up in a PE 10 of these things. And they said, go out and find the AI for this. And Evan goes out and goes, there's no AI for this. And he goes, I'm starting rebar. And I go, they're folks who have been in these verticals since they were kids. He watched his uncle in this vertical. It's like there was nothing else he was going to do. I go like they have more edge and they know what to do with. I get you.

45:00Harry Stebbings:Sorry, just to be clear for you. Nepo baby, where I'm from, is trust fund baby who has billions of dollars. I was like, dude, I do not want to be funding the kid who's at Scorpios in Mykonos spraying dad's money. We're using Nepo babies with different definitions. Very different definitions. I'm talking about folks who've been in a vertical and have lots of edge in that vertical. That I totally get. You said you haven't sold a share of SeatGeek. The timing of when you get out matters a lot. Do you have any lessons on when to get out? Given, I think this generation of seed managers will be defined by their ability to access and navigate secondary markets effectively.

45:40So it's interesting. You're asking this at a time where I have never seen secondary markets as liquid. It's probably not that surprising given fewer IPOs, fewer M &A up till the moment here, an IPO market that will probably be open for the remainder of this year. And then these IPO markets always close. So in the top 100 names, wow, the secondary liquidity is incredible. And you can price your position, I would say, reasonably efficiently. You can look at around and go, okay, the secondary market's offering me a 25 % discount is probably worth 7.5%, not 10%. And then you can look at a number in the top 50 at least, where you're being offered at least the price per share of the last round.

46:27100%. Because loads of folks, loads of big folks, Blackstone, didn't get their pro rata, and then they're sucking it up. Most I'm seeing do not have a discount, for sure. Yeah. We've seen a premium where insiders know there's another round. Talking to your point about momentum, you were talking about momentum in the early stage. We've seen situations in our multi-billion dollar names where the round goes down in December and the boards are already talking about the March round. And we kind of see it sometimes when we're not on the board, but we just see it in the momentum in the secondary market.

47:03Now, Harry, you're in very rare air there. And let me just say, I don't want to in any way make it sound like we're in that with all of our companies. We're in that with, at any one point, a handful of companies. But in those situations, I think the difference in fund management is when you take secondary and the ability to give DPI. Even in your top names, sometimes taking 20 % off the table, if you can return 25 % of the fund, particularly if it's a new-ish fund. So if it's a 2024 fund and you can give back 25%, why wouldn't you do that? And you're still long. You still own 80 % of that company.

47:38Harry Stebbings:I just think we don't think about the velocity of cash enough. And what I mean by that is like, yes, there might be another double. But if I have to wait five years, and then the IPO, and then an 18 month lockup, Jesus, give me 50 % of that now. And I'll way rather have the certainty and the DPI now than the maybe a double from here with six and a half years. This is not a precise science. I've looked back in every direction. And we've gone, by the way, the best is you sell 20 % and you were wrong. Awesome. Did you do a good job of sell down on Uber? You know, in retrospect, we probably sold a little too early.

48:15This was early on. You know, this is a business that's getting close to$10 billion in valuation, and there's an opportunity to take some off the table, and you're very new.

48:24Harry Stebbings:Also, at the time, I'm so sorry, it sounds awful, and again, you chastise me. $10 billion at that time was so much more than it is today. Yeah. Did you sell all at$10 billion? No, definitely not. No. No, we were net long at the IPO. One thing that's very sad or challenging is when an exit event happens, and then you look at kind of the number that comes back to you, and you're like, what? Where did it go? And I think you're having this normalization of incredible levels of dilution today, more than ever before. Do you see that and worry about that? Look, dilution, it's interesting. Like, I look at Whoop versus Suno.

49:00Like, we're so proud to be in both. But Suno has been a very quick journey. So if you look at how much lower the dilution is, part of it is just how quick the momentum of that has been versus a whoop, which is hardware. Took a long time, raised a lot of money along the way. Like unbelievably proud of this company. But some of these companies, it's incredible how little dilution there is because the pre just goes through the roof.

49:28Harry Stebbings:We're seeing also a lot of very low dilution but large rounds. You're like ramp raising, you're like 500 million at a 40 billion price. And actually kind of seemingly no kind of 50 million rounds at a billion dollar price. How do you think about and reflect on those? Just a brilliant product for founders that they should absolutely take advantage of. A normalization of continuous funding because they do more frequently. How do you think about those? And this goes in every single direction. You've got to be producing and you've got to get into the rarest of air there. And probably there's a secondary opportunity in that kind of situation for us.

50:09So we look at that. And again, we're in so early that at those kind of numbers, that kind of momentum, like we're trying to sell a little bit of our position.

50:18Harry Stebbings:Do you find LPs have changed? And what I mean by that is like, I speak to a lot of LPs now, Do you know what? Honestly, we can say what we want. They've gone back to wanting TVPI. They've gone back to wanting big numbers. And yes, they want DPI. Of course, they always want DPI. But they are still very impressed by TVPI. And they're very impressed by, oh, wow, you're in this glossy name. Lovable, Lagora, Macaw. They're still that. Do you find they've changed or are they still the same animal? There's lots of change because of who was doing this 15 years ago and who's doing it now. You have to have some allocation.

50:53and the big funds provide these containers for the large endowments and the large public investment corporations. If I think of the same LPs that have been with us for a long time, a lot of them have minimum size checks now. So we're too small for quite a few of them. It's like, if I can't put$50 million to it. And I think it just reflects the inflation of the entire environment. There are a bunch that really do need the TVPI, particularly the fund of funds, because of who they're selling to. By the way, we've seen fund of funds do secondaries of their entire fund. So we go, oh my God, you're in fund two or you're in fund four.

51:35You should never sell. And it's like, it's not about you. You're a rounding error in this fund and it's got three or four good names. And I think what they're trying to do is give liquidity to their LPs for the next fund. So we've seen, when I talk to you about secondary, it's in a particular name, we've seen an entire fund, billion dollar fund, easily just sell the whole fund or sell a vertical slice of the fund. What's going on here is the finance around VC has become so much more sophisticated. I don't know if this is good for the entrepreneurs. It could be because it just means there's way more liquidity in every direction.

52:13And I think there, if you're a winner, it's great because you can manage the secondary to some degree. And if you're not on the winning side in terms of the entire ecosystem, it can be very tricky. By the way, Harry, I talked to you about this on this podcast. We spend, other than thinking about some secondary in our very mature portfolio, I spend very little time on this. The beauty of this is I am not a financial animal. Ultimately, I'm much more of an entrepreneurial, curious animal. I'm looking again for these wizards, I don't know, these wayfinders. I'm looking again, and this is the problem for me in a way, is I'm looking to repeat a success.

52:56I'm looking for the next high. I'm looking for a Noah Glass. I'm looking for someone who is that focused on and has a vision and will not take no for an answer. That's how I'm spending 90 % of my time. and not spending much time even on LP management.

53:13Harry Stebbings:Do you think we have less loyalty than ever? You said focus there on the founder side. You see founders have angel investment portfolios that are as big as our fund portfolios. You have them doing side funds. You have them doing two companies at once. You have them leaving very quickly often in 6, 12, 18 months. Is there less focus slash loyalty than ever? We've definitely seen evidence of that. We've also seen people who stick it out way beyond what is rational, just because they're obsessed. So I think on the margin, you see some of these actors. And we've seen founders, so-called founders, and they were like kind of the founder, but they got a CEO involved and then they became exec chairman and they used their brand power.

54:01And I think like shame on us for, and we did get involved in some of these situations where we were dazzled and was like, you know, second time around, is that person going to stick around? And some of it is just didn't get big enough fast enough. So there's some abandonment. I still see that the vast minority of the time. Like I think it's easy to extrapolate and go, that's a trend. And I could be very Pollyannish about this. But for the most part, like I see founders wanting to make it work. Second time founders is a little bit embedded in that question. And the question is, if you've done really well, what does it take to move the needle?

54:42And I think overall, we've done a little better on second time founders who didn't do that great up front. They did okay, right? It's life changing. Like the first million dollars is so life changing. But they're really hungry. They've learned some lessons. They've got one or two people that will join them on the next journey. They've learned some lessons and they are hungry. They're in a hurry as well. We've done better there than generally with folks who had great outcomes and kind of said, let's go again, because those are the folks who got bored and went like, not big enough, not fast enough.

55:13Harry Stebbings:What does no one know? You've been very successful. What does no one know about making money that you wish you'd been told earlier? You kind of start to go, the stuff that really matters is kindness and how we interact with each other and how I left you, how you made me feel. And all the rest is fluff. At some level or another, we're like our phones have become these remote controls for our lives. Actually, the entry price to get what you want, when you want, if you want a vehicle there, if you want your food there, if you want to book a flight or a train ride. earlier last week, the plane is delayed literally on the Amtrak app.

55:54Two seconds later, asked the Uber to go to Amtrak, go to Penn Station instead. The degree to which we can get what we want when we want at any level, you don't have to be that wealthy to get it, is insane. So what's happened is our level of expectations have just gone up through the roof. I don't think that's just about you and me. I think that that's the perennial equation of like satisfaction equals perception minus expectation. So it's just much easier to not be satisfied anymore because our expectations are so high. So our perception, it's one thing when you go into a five-star hotel, you have this huge expectation.

56:31You walk into a three-star hotel, you have a much lower expectation. Well, extrapolate that equation for life now. So it's easy to get pissed off. The antidote to that is stopping for a second and saying, how would Harry feel when I left him today? Did he feel like I gave him a real hug and I was kind? And I think that's going on in my 50s now is how do I leave people? How do I leave the world? How do I leave the entrepreneur? Was it like we squabbled over the last percentage point

57:02Harry Stebbings:or it's like just this journey's been awesome? I always think there's energy drains and energy gains and how you leave someone is how you're remembered. Just going back before we do a quick fight, I do have to ask, how does this landscape change with OpenAI and Anthropic? They are so seismic in terms of just sheer size. Both will be trillion dollar plus, potentially close to two trillion. How does that change the landscape, do you think? For the better. I remember the Microsoft Google case going on forever and Gates going, you know, we are disruptable. At the time going like, who could disrupt Microsoft?

57:34And turns out, you know, Google was Google. And then you go, who can possibly disrupt Google? and then you look at OpenAI and Anthropic and you go, wow. If nothing else, and there's so much else, like if you look at the top of the funnel in terms of where you start your search, when did you last start a search on Google? It's just mind-blowing that displacement. And the good news in this environment and this ecosystem is that they will, too, be displaced. So the platform has changed tremendously. Do you think Google has been displaced?

58:05Harry Stebbings:No, I don't. I think Google's a net winner. Do you think Microsoft has been displaced? I think Microsoft have done a crappy job of AI generally. Google is actually, if anything, in pole position because they come from that environment and the ability to search with context, the ability to apply AI with context is just like incredible. But they're having to fight like crazy for it. Microsoft, it's not clear to me that they can get back because their AI feels second rate compared to the top three or four. So there's a platform change. There's always been a platform. You could argue that radio, television, internet was a platform.

58:44Can you do well in that platform? Oh, hell yes.

58:47Harry Stebbings:Do you think it will lead to a ton more venture money coming in with a huge amount of money going back to LPs from the returns that are generated? They'll plow those back into venture? So the returns at the top are going to be incredible. They have to be. And I think that that capital is going to spill over into venture and all sorts of investing. You alluded to earlier, Angel. I think luxury, right? Like I think if you own a luxury property, I think like - San Francisco property prices. Oh my God. Like San Francisco is Rome. I was there like six weeks ago. Like San Francisco and the Bay Area is like, and it's more San Francisco than the Bay Area, is back on steroids, right?

59:25It's like going to Rome. When people write off the United States, which is to me still the greatest country in the world for venture capital, I go like, when were you last in San Francisco or the Bay Area? because it is insane at the moment. What's going to happen is there's always boom and bust. So a lot's going to come out of the system at some point. Are we headed for another dot-com crash? Definitely. If is not a question. When, nobody knows. But is there a lot of capital, a lot of gain coming out of the system, and that will be reinvested in venture? And it may not be in classic kind of structural venture.

1:00:00It may just be in angels putting money all over the place, And some of those angels are going to know people that worked with them or for them. And they're going to, I think you can bypass traditional venture to a great extent. And that's the challenge for us. That's the challenge of how do you stay relevant in this environment when there are so many alternatives.

1:00:18Harry Stebbings:Final one before we do a quick fight. Do you buy the commonly stated concern about smaller teams, job displacement, and a concerning future for human participation in labor forces? The underpins to Endeavor are getting better and better and better. I remember when we went from servers to cloud, and that was like, wow, I get all of this for free. I don't have to do any of that. Security and servers, forget that. I just do cloud. If you look at where AI and where this foundational platform layer kicks you off, it is incredible what you can do with very few people. And we are looking at certainly sub 10 people companies achieve a lot.

1:01:03Do I think that we're going to have mass unemployment because of AI? And you're seeing a lot of leadership now agree with the viewers. No, I think we're going to see tremendous productivity gains. I think like every wave there, the haves and the have nots. And if you're not training and playing, it's a little bit why youth has an advantage because out of college, and that if you're tinkering and playing, you are familiar with the tools. You can use the tools. And it used to be the haves and the have-nots were like have data. I talked about this with Noah Glass and Olo all day long going like the value of having data and using that data.

1:01:41And by the way, it's yours to lose if you don't enrich that data. Now the value of having these tools, it's becoming more and more binary. But I do believe you'll see swaths of people retrained on this. And I think you're seeing it globally. I think you're seeing it as an opportunity in low-cost environments, in places that are not Europe, not the US, not the North, where you can skill people up and you can provide these skills to the rest of the world at tremendous cost advantage.

1:02:11Harry Stebbings:My worry is it's much easier to train than it is retrain. And actually the 22-year-olds coming out of university who are tinkering in dorm rooms with Claude and kind of, they're not super AI pill, but they're mentally plastic to it. And they're gonna be pretty good versus Simon or Claire, who are 45. They've always done their job in accounting and they just are not so mentally plastic. The only advantage that Simon and Claire have is they are very vertically knowledgeable and relevant. So sometimes in terms of sales, like if you're selling to yourself, there'll actually be very good salespeople.

1:02:46This is a theme that I'm kind of interested in. services business where you won't buy that from you. You want to see your auditor at some point. You're prepared to say, I know AI will do an amazing job, but at some point you want me to come see you and just kind of like go, you know, I haven't like left this whole thing to AI, right? Like I actually know what I'm doing. So I think there'll be people who are vertically relevant to be able to sell. And there are many industries where the relationship still matters. At a certain point, if you've got litigation and$100 million, you can get AI to write that little contract for you where it's$1 ,000 on the line, but you've got$100 million litigation, you want to look at me and say, like, Dave, you're 10 years of experience, I need it right now.

1:03:27So I think there are times where knowing a vertical, being relevant in that place, and in the service industries, I think it's good for the UK, by the way, I think there'll be a ton of people who are still needed for the human interface, that's not going away. I think that a lot of the work that was grunt work and human

1:03:43Harry Stebbings:work behind it, going away. On the services side, I think it's just a time expansion play, which is like so much of the things that you couldn't afford a lawyer for, you'll use and you'll get great benefits from. That is just a time expansion play. I think insurance, lots of admin, like lots of life insurance. There's been a lot of direct life insurance sales anyway. But I think that in bigger ticket items, having a human who gets it as the interface, there's still place for that. There was something interesting. I had this incredible founder, June, who's the founder of a company called Simily, which does simulation markets.

1:04:17Harry Stebbings:And he was like, we will have companies spend 100 to 200 million on one model kind of result because that model result is so important. Like the output of one query. And I was like, wow, that's a really interesting world where you will spend$100 million on Anthropik telling you the answer to one question. What's the size of that organization that would spend that kind of money? Oh, P &G, Coca-Cola, NVIDIA, Visa, you name it. Is it worth us sponsoring the World Cup for a 10-year exclusivity period visa? Right. I think that governments and defense organizations, some kind of speculation with data of the future, I think that's a very interesting play.

1:05:00Harry Stebbings:Do you worry that Trump's been good for business but bad for everything else? Is that a hard balance to hold in your head? I ask as an outsider, genuinely curious. I think you have to hold many truths at one point in time. The question is, did Trump create this environment or is he presiding over this environment and getting credit for it? I think with all presidents, they arrive and they get credit for the environment as it is, and yet it was created many years ago. And letting AI thrive in the U.S. has generally been a good thing for the tech industry in the U.S. The level or lack of safeguards on that could well be problematic.

1:05:41but net net, like if it's good for business, it's good for the US. I think Roosevelt said that. That's what these administrations have said. And by the way, I think that a lot of the tech backlash around Biden was for this reason, whether it was true or not. A lot of insiders say to me, it was BS, right? That like for the most part, Biden was super pro business. And if you look at the subsidies for energy. If you look at a Tesla today, this is the thing that I don't really get about Elon is the non-dilutive government funding that Musk got for Tesla from the Biden administration was huge. So without being political, net net, like government in the US has been pro business for a long time.

1:06:31And I think that the country is really reaping the rewards of that. There are two AI superpowers in the world. By the way, what's so fascinating is in the 1820s, China was the economic superpower of the world. I don't know if you knew that. No, I didn't. Yeah. So Great Britain displaced China. A lot of it was industrial revolution, and then the US displaced Great Britain. In The Economist, there was a chart on this. But in the 1820s, 25 % of the world's global output, economic output, was from China. It was the biggest economic machine in the world. And really what you're seeing is two superpowers emerge for sure.

1:07:07And I think a lot of this is going to be about AI. AI flows into not just industry, but in terms of what's going on in defense, having been very, very early the first check in Shield AI and watching how that's played out. The US needs it. Our enemies have access to

1:07:25Harry Stebbings:all of that on steroids. I'm terrified about China right now, to be honest. When you look at the power and strength of their open models. But that goes back to thinking about Microsoft and Google being disrupted. What could possibly, you know that Anthropic and OpenAI are going to be disrupted. It's like unequivocal. Like our whole careers are about disruption. Those platforms never, ever stay forever. Where is it going to come from? Excellent chance it comes from China. It's coming. 100%. God, we haven't had enough time for them to establish their incumbency yet before they're already being taken down by Chinese open source models.

1:08:01Harry Stebbings:It goes to the point on the speed of innovation cycles. By the way, we haven't even touched on underlying computing. So if you look at photonic computing, if you look at what's coming down the line now. So you looked at Intel at a point when that could never be disrupted. And then NVIDIA, it's just mind-blowing. What's coming to get NVIDIA? like the photonic computing plays right now, where it's not electrical anymore, it's photons. So if you look at the data centers where everything that can be optic fiber now is, so every single connectivity piece of hardware is fiber, the only thing that has not been nailed is the chip.

1:08:37You're going to see optic chips, which are very, very energy compliant. So when people talk about the data centers and the energy sucks, that's going to change. In my view, if you say in 10 years time, and I am not a thematic investor, but I am such a deep believer in the status quo being changed always. And like nothing stays the same. I think photonic computing is coming down the line. And I think that's going to be the NVIDIA disruptor or NVIDIA is going to buy those companies.

1:09:07Harry Stebbings:Okay. And the capital intensity required to build a photon company, I think, or an energy company as we're in some, it's just dramatically more capital intense than prior technology. Again, going back to my point, you need more money. Well, this is where the US could be deficient. If you look at the amount of money that's being spent in China on energy efficiency and energy research now, I don't think we're spending enough. And by the way, that's a negative of the Trump administration is we need much more money being spent on R &D. And I think there was a view that the universities are squandering it.

1:09:38To a large extent, I agree with that. But I think that we tapped off a lot of DARPA, R &D, that finds its way into every nook and cranny of the economy. And we need more of that R &D. We see some of it. I live in Cambridge, Massachusetts. We have some of the best R &D organizations on the planet. If you look at MIT, Harvard, Northeastern, BU, BC, what's going on there? And cutting that spend, which goes back into society, I think is problematic.

1:10:08Harry Stebbings:Totally get that. Another one, though, that is more challenging, I think, is just policy and regulation. Like Chinese approach to policy and regulation is almost none. It's none. And it means that you can bluntly build and deploy so much faster. I mean, Europe's the worst. The US is tough, too. I'm not in biotech, but when I talk to friends who are in biotech venture investing, they're all flying to China all the time because they're going, look, in terms of R &D, in terms of licensing, in terms of anything goes. And in fairness, it's not a totally anything goes environment, but there's so much more grassroots activity.

1:10:41And a lot of it has to do with regulatory environment. What would cause you, final one, what would cause you to increase fund size? Oh, I would say if I am honest about what we did early on is as an angel, I had said the risk premium for the seed stage was way overstated. So the premium for experience, right, like I couldn't get that. A lot of the folks that I got involved with very early were graduating. They were Noah Glass, Jack, you name it, Eric and Micah. There was a dislocation between the perception of value later versus earlier. And that has been largely narrowed and crowded out. So if there was some kind of arbitrage.

1:11:29Harry, we didn't come at this going, I'm obsessed with economic arbitrage. We came at this going, I'm obsessed with great founders and I want to vicariously be on that journey. But if you had to look at this retrospectively and say, what did we do in economic terms? There was an arbitrage. There was a real arbitrage because the risk premium at the seed stage was way overstated. That has changed completely. What would cause me to raise a bigger fund? If I looked at series A or series B or series C and went like, there is such a value opportunity because everybody's abandoning this. I don't think it's true at the moment.

1:12:04I think just capital and money finds its way to everything. But if you went, so many series A companies are orphaned and there's amazing value. There hasn't been one to 10 to 20 and ARR increase in one year, but wow, they're on track. And that looks like, it smells like Olo. It looks like SeatGeek. I think that would cause me to say, we should be investing$10 million at that stage. So it's not momentum. It's a sense of, wow, like I can't believe that others, and I have been very tempted there. I've been very tempted to say, this company is doing incredibly well on the revenue side

1:12:39Harry Stebbings:and it's being undervalued. Final, final one, a principle of the quick fact. You say that about Oloan. I love, I think Noah's one of the greatest, awesome human. Dude, it's a 17-year journey to a$1.6,$1.7 billion, right? $2 billion exit. $2 billion exit. I love Noah. I love Ola. It's an amazing business. It's an amazing journey. But when you think about utilization of cash, most optimally, 17 or 18 years,$2 billion exit, the IRR is not amazing. How do you reflect on that and justify that versus maybe hotter rounds? Yeah, I mean, the outcome was it's publicly known. Eventually, Toma Bravo, we took the company private for about a$2 billion valuation.

1:13:19So not bad for a few years of work. and if you take it on an IRR basis, you're probably right. The journey and the fun of it was just enormous. So being involved with Noah where it was Noah, a few other founders and me from the beginning and being on the board until that sale

1:13:37Harry Stebbings:was just the ride of a lifetime. Okay, listen, quickfire round time. What have you changed your mind on in the last 12 months? What's been surprising and what I've changed my mind on a little is where AI should have impacted like crazy and I've seen lesser impact so far. With all the hype, with all the momentum, like AI changes so much in terms of software and enterprise and SMB, other than the models themselves and some good stuff around human interface. So a lot of stuff around the voice has gotten a lot better. I don't know about you, but I would have expected much more around consumer AI. So I've seen Suno, but like in terms of changing how I do stuff, I type much less, right?

1:14:21I speak much more in terms of communication. I would say there are so many kind of consumer areas that I feel are not yet played out at all.

1:14:30Harry Stebbings:When you're doing Suno at$5 billion, what are you underwriting it to? I think that the folks investing at that level are going, this is a Spotify disruptor. That's Spotify and Apple Music. It's a big bet that. They've got to go from creation tool to consumption tool. Oh, totally. Totally. That's why Jack from Snap was brought in. Interestingly, I was at a conference with Martin. Martin was on a, Martin Camacho, who's the CTO of Suno. He was asked a question, if a large language model could do what you do better than you do it, like, would you slot that in? And you're talking to the CTO, the guy who's built the whole model.

1:15:08The entire Suno model is from the ground up. And without missing a beat, Martin goes, wouldn't think twice about it. It goes to your point of, this is a consumer product. the experience, the interface, think Spotify, that's what we offer. How we get there is obfuscated from the user. The user couldn't care less. Whatever gets you there.

1:15:31Harry Stebbings:Did you ever predict the speed of that? No, definitely not. Do you remember the days when Slack, 1 to 10 in 18 months, was the gold standard? As soon as multiple hundreds of millions, half a billion or whatever it is now. It's nuts. No. It goes back to Uber. When Eric's asked, how did you know? How did you know? And Eric goes, I didn't. He said, the company I saw before, the company I saw afterwards, we underwrote those in the exact same way. Anyone in my seat who says, I knew, is just full of shit. I absolutely love that. What's been the most controversial deal that you've done internally? What can become controversial is the what or the where.

1:16:11So certainly Coupang was like, got back. I said to Eric, Korea, and he said, do you even know if it's North or South? But the magic there is I am based in Harvard Square. So people go, how do you get to Korea? How do you get to all sorts of places? And the answer is Harvard Square. So bomb drops out of HBS after his first year and comes to see me. And another controversial company was probably Shield in terms of the what it does. So I would say the whole partnership didn't necessarily love defense drones. And early on, it was like, is this only defense? So I love it because it's certainly taken us to some very controversial geos and controversial watts.

1:16:54Harry Stebbings:Our prediction marketplace is just legitimized gambling. It has to be. I mean, if you look at like Kelsey and Polymarket, what's the difference there between DraftKings and Betway? And they seem very similar to me. But by the way, this will be controversial, TVPI versus DPI. The one looks like a prediction market, right? And the one's real. Like I could say the same, you know, TVPI looks like a prediction market, right? But I mean, candidly, when they're doing 2 billion in ARR, who gives a shit? The one thing that you worry about is a Trump change in administration and what that does to regulation around them.

1:17:28Yeah. That's a different game.

1:17:29Harry Stebbings:What do you know now that you wish you'd known when you started of founder collective? So for the most part, frameworks have saved us. It's also the place where if I look at some of the deals that we didn't do, and we just went, we used valuation as shorthand to say no, terrible mistakes. So Klaviyo loved Andrew, loved Ed, came to me first, came through Hugo van Furen, who also sent us Suno, and didn't do it because of the framework. And the framework allowed me to easily say no. So we'll miss a lot. We'll make plenty of mistakes. I think I freed myself like you a little more in that area and just go, they're extraordinary.

1:18:07But the frameworks have saved us as well. Penultimate one, biggest advice on a happy marriage and relationship?

1:18:14Harry Stebbings:Kindness and being present. Being present with each other. I think of this at dinner, at dinner time, no phones are allowed anywhere near the dining room table. And I don't take my phone to my bedroom. Like my phone is never alongside my bed. Here's the rub. doesn't, I don't need my phone to be distracted. Here distracts me perfectly. How to be present and involved and look you in the eye and kind of make you feel with my body language that I'm hearing you, that I'm invested in you. I think the same thing that we think of in founders, like happy life, your kids, your wife, your siblings, your parents.

1:18:55This is the lifelong long goal. Like I don't, I have not got this nailed, but how do you show them you're present? You're there. They matter to you. And that's, that's the quest.

1:19:06Harry Stebbings:Final one. What are you most excited for in the next 10 years? You know, I look at like me, you know, my mother and I walk marathons. She's got MS. I think there'll be amazing discoveries for chronic conditions, which we always just assumed would be forever. And that could change millions of lives. I think that's super exciting. What are you most excited for? I mean, you're leading the witness in a few ways here, but I would say that each wave brings things that we couldn't imagine. And I look back to driverless cars, and there was a promise that that was like five years away. And it turns out like 20 years from now, I saw Waymo driving around London.

1:19:44I think it's coming here soon. We're not quite there. And yet we're back in the, it's slow, slow, slow, and then it feels like overnight. And of course, if you were involved, and this is, again, the intoxicating part of what we do is, you know, before the world knows or the world cares, but you know that it took a long time. And yet, I think we're on the threshold of a lot of really interesting stuff. Like I think that you and I could be buying the very last driven cars. Like I think that in five to 10 years time, like our kids will not need to drive. And I think with AI, we're on the threshold of a lot of that.

1:20:18And And there's a lot of doom saying there always is. But in terms of discovery, in terms of what we know about the world, in terms of health, right, in terms of, you know, you look at chemo and the number of friends of mine who have been treated or have passed away. And you look at chemo and you go, that is like prehistoric. And I think that we are with AI, with the amount of compute going on in healthcare and other realms, like there are solutions coming through, not fast enough. But I think it's so exciting.

1:20:48Harry Stebbings:what we're involved in. It's very exciting for me too to hear you say that because I don't actually have a driver's license. And so you could assuade me or relieve that necessity. Harry, you live in the most walkable, in summer, the most walkable, wonderful city. You don't need a driver's. Oh my God, dude, I never ever need to drive. Thank you so much for doing this. Thank you so much for 11 years of friendship. Honestly, it means so much to me and you've always been so kind to me. Harry, you've gone from strength to strength and that's my wish for you. Keep going from strength to strength. You've been a great, great voice in this environment, a great voice in the world.

1:21:22Thank you so much. Thank you.

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1:23:27Harry Stebbings:I do this show three times a week. That means three sets of research, three sets of prep, three sets of follow-up, and about 400 other things in between. My inbox doesn't sleep, and neither do I really. I was juggling a dozen tabs just to keep up. Another window, copy this, paste that, lose your place entirely. That is why I started using Superhuman Go. It's an AI chat that is always there when you need it, already up to speed on what I am doing. Last Tuesday, two minutes before I went live, I had a 40 message thread I hadn't read. I asked Go to summarize it right there in my inbox. No new tab, no switching apps.

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