[Highlight] Why Henry Shi Chose Anthropic Over Starting Another Company

0:00Hey, Ben Kesinoka here, co-founder and general partner of Village Global Global, a network-native venture firm. What you're about to hear is a clip from a longer conversation. If you'd like to listen to the full-length version, find the link in the description. Of course, subscribe so you don't miss the next one. Enjoy.

0:20Let's talk about your journey again. So you're out there. You're doing your crash course. You're building in public. You think about the Lean AI leaderboard. and then you say, today it's either entrepreneurship, VC, or a frontier lab. So walk us through the three options and what you chose to do. Yeah, I think historically as a repeat, exited, more successful founder, I think many people felt compelled or maybe even trapped to the two paths of either being another founder or being an investor. And they feel like those two are the only two options available to them. And whether that's because of opportunity cost or lifestyle choices or preference or even pride in some cases, I think the common path are these two.

1:13And I think it's often very hard for founders to say, hey, I want to work for someone again. I want to be caught by the entrepreneurial bug. And I can certainly relate to that. However, as I was exploring, I realized that there's a third path, which I wrote about in my post and content, which is a frontier lab, which is actually quite a little bit different. And I'll explain why. Well, I explained the three options and I explained why the third. So on the venture path, I spent a lot of time on the other side of the table. I mean, I have a lot of experience as a founder, pitching investors, getting rejected 144 times.

1:47So very much an experience on the founder side. Their loss. Yeah. And I can't say that it's been, and I think if you talk to most founders, you know, it's one of the things they like least about starting a company, right? It's very much a song and dance. But what I didn't appreciate, or maybe I appreciate more on the other side now, as I spent time on the other side of the table as a venture partner or sitting in certain meetings, meeting hundreds of investors, and then having entrepreneurs pitch me, is that it's also very much a sales job on the other side. Some of the stats really surprised me, but once you kind of see it, it kind of makes sense, which is most investors are certainly the top ones.

2:30the partners might make two or three investments a year, right? So they have to be super selective, and it's really about picking. And when you're super selective, you kind of have to go for deals that you feel like can return the fund, which is returning nowadays maybe$10 billion or more, right? And oftentimes that means converging on certain types of founders like ex-OpenEye, Stanford researchers who are doing world models for XYZ, right? Because that is the consensus of these big, big$10 billion returns. And what happens is, but these founders, because they fit that profile, they have many options.

3:06They have many term sheets already. So your job ends up becoming selling founders who don't really need your money to take your money, right? Because they already have 10 term sheets. It's like, how do you convince them to take your money versus someone else's? And then the irony of that is the founders who actually need your money, who you can actually help, you don't want to help because they have no term sheets, right? And if you're going to do two deals a year, are you really going to take that bet on this founder who's maybe unproven, unknown, and has no term sheets and no real consensus?

3:34Right now, there are definitely firms who take a really contrarian approach. But for the most part, I think it's very much, well, there's this founder that fits the mold. They're going to be able to build a company. Let's convince them to take our money. And for me, it just felt like very much a sales job, which is fine. But I wasn't sure of something that I wanted to do full time right now. Maybe sometime in the future. But for now, I felt like I still had the builder energy and drive to do something. And I wanted to help more founders. And doing two deals a year is very hard because you have to say no to 998 founders who pitch you.

4:08On the startup side, I also thought about it a lot. I was thinking, playing with a lot of different ideas and trying to test different things. But I think it came down to two things, which is one is there wasn't like a mission or maybe, yeah, it's just like a mission that I really, I wanted to spend the next five, 10 years of my life solving. Like great companies take a long time to build, even super.com. That was pretty much a 10-year journey. And so I knew the second time around that it was going to take a long, long time, and I want to make sure that whatever I dedicate myself to, it's something that I really, really believe strongly in the mission, the cause.

4:42And there wasn't that strong mission or cause just yet. And then two is I don't want to start up for the sake of doing a startup. I mean, you can do another B2B AI SaaS wrapper startup, and that's fine. And even these days, you can get it to 5, 10 million AR, and that's probably decent. But for me, my company is still going. I'm on the board. I'm fully vested. Companies continue to grow in scale, looking to go public in the next couple years. So for me, it's like you can make an extra 10 million AR here, or I can just tell my team to do it, and they can do it and grow from 200 to 300, et cetera.

5:17and that's probably more impact and equity value. It's never been easier to go from zero to five, 10, even 20 plus million AR, but it's never been more unclear who's going to go from 10, 20, 50 million to 100 and beyond. Maybe look at Jasper AI, for example, one of the darlings of the early Chachipiti era, zero to 100 and now back down and some are stabilized, but it's really hard to know who has staking power. And even some of these companies and the headlines you hear, like are they margin positive? Are they margin negative? or how much money they're losing through inference, through model costs.

5:49So it's really hard to know who's going to be around and who's going to get replaced and who's going to get eaten by the models. So it's very uncertain. This actually relates somewhat to this new type of funding called seed trapping, which I guess is a term that maybe I didn't coin but popularized, which is this new form of starting a company, which is you take a little bit of seed capital and then you scale it and you use that to scale it to get an escape velocity. so a combination between bootstrapping and raising a seed fund but it's unlike bootstrapping you're not paying out of your own pocket in the early couple years and you have you can play with someone else's money and get to growth but unlike traditional venture you don't have to keep raising series a b c d e f g get diluted to like two percent and lose control and have to deal with all these like board dynamics etc so it's kind of a little bit of best of both worlds before ai it wasn't really possible because it was really expensive to build product, to bring it to market, hire all these people.

6:48So you needed lots of, and you couldn't grow revenue so quickly and certainly not profitably. So you needed to keep taking capital. But I think if we look back, a little bit of irony is, do we really need to invest$500 million to make a B2B SaaS company? Right. And now, especially with AI, you can certainly build all these things and get to scale and because there's so much demand for and willingness to pay for AI products, you can get to market much quickly, much cheaper and scale, make revenue and be profitable. So if you have that, then the question is, what is the role of traditional venture capital?

7:23So there are new forms of funding that can enable these types of seed-strap companies. I'm sure they may not be $10 billion companies, but I think for a founder, if you're like five people making$10 million a year every year, that's pretty good. And you're probably doing better than most venture-backed founders, right, who are illiquid, who are stuck, and whether they can or can't raise, but it's just tough, and you have total flexibility and control. So then are there new capital structures that can help scale these types of companies, whether it's like revenue-based financing or things like that?

7:53So these are some of the things I've been piloting with, and I know we chat about this with Village as well. Can you back founders in the earliest of stages in some sort of founder-friendly structure that has early DPI and returns? It's not uncapped, but you're getting returns. You can recycle that and then help many more founders than just the two founders. Two founders a year because you have to return the whole fund versus here. You can help a lot more founders and help them get to seed-strap the escape velocity while still having good returns for the fund and early DPI. Right. And there might be optionality because some of those businesses might actually end up being huge decacorns or something like that and decide to raise following capital.

8:33So, yeah, we love that. structure. Okay, but you rejected those two options of VC and founding. Yeah, so after going through, spending about half a year thinking through learning, building, experimenting, I sort of came to the thought that if I'm not going to be an investor or start a company right now, and I'm going to do AI on the outside, may as well do it at the inside, at a frontier, on a good mission, make a good impact with great people, great talent density, and really take my experiences as an entrepreneur and builder and apply it to a good cause and push it forward. And I think historically this opportunity probably didn't emerge from many founders because there was nothing of such consequence or scale or excitement.

9:19I mean, maybe Google in the early 2000s, maybe. But, I mean, really this is maybe one of the biggest inventions of our lifetime, and many people say maybe the humanity's last invention in terms of AGI. So, yeah, it certainly is very powerful. And I kind of saw the capabilities of these AIs developing exponentially. And I decided, you know what, if I'm going to do it on the outside, may as well do it with a good team on a good mission. So I got in touch with some of the folks there because we were super early customers. I had a friend from Waterloo who was like an early researcher there. I've known Ben a little bit through the startup community.

10:00and we're just chatting a little bit and they were like, hey, we have this zero to one prototyping role. It's maybe good for founders. And I was like, sure, happy to roll on my sleeves and do whatever. Like I didn't need to do X, Y, Z or manage my team. In fact, I'd probably prefer not to because having gone through that, just having managed hundreds of people, you really kind of appreciate the fun and simplicity of just building. So we're chatting and I think we're chatting through that process and I think it was a little bit like I did pretty well and then also they kind of realized I'd done a lot.

10:35So, hey, maybe you can just help Ben directly and help across the org and bring some of that founder energy and experience and just help execute across the org. So that's kind of the opportunity. But Anthropic is very much very disciplined and pretty fair in that process. So I think everyone more or less goes through an existing process and then through that process, eventually kind of maybe people figure out certain roles. But, yeah, overall, it was pretty fair and disciplined process, and I'm pretty fortunate to be able to make an impact on the inside of the frontier. Well, and it's amazing because the talent density there is incredible.

11:12Sometimes the flip side of talent density is a lot of egos and a lot of independent thinking, which isn't always good for alignment. And I don't mean AI alignment. I mean, you know, human alignment. So can you tell us a little bit how do decisions get made, how do priorities get set? Yeah, yeah. So coming in, I think one of the first things I realized is the mission is very much real. You definitely feel the alignment towards the mission, but really care about it and take it very seriously. And on the outside, I think there's a little bit of skepticism around like, are they just saying that? Is it just posturing?

11:46Is it regulatory capture? But certainly on the inside, it's very much real. People take it very seriously. It's very open. transparent. Dario gives these incredible all-hands discussions where there's no corporate speak. He'll answer every single question. There's no dodging or roundabout, just straight on, heads on, speaking very candidly. And I think that creates a lot of alignment and trust in leadership and division. And you see the decisions being made that oftentimes deprioritizes revenue or certain metrics that a normal company would care about, like engagement, clickbaiting, and things like that, really making tougher decisions to do what's right for customers, consumers, or even just like global good or beneficial deployments.

12:32So I think overall, you definitely feel that. And because there's a very high culture bar in terms of the values, cultures interview, I think you're selecting for people who really care about that, who are here in it, doing it to the right reason. And I think people take that very seriously. Thanks so much for listening to the Village Global podcast. You can check us out online at villageglobal.vc. We'd love to hear from you, your feedback, your ideas, your inspirations. You can email us at hello at villageglobal.vc.