ByteDance is the most advanced AI company in the world.
You know, it's very underappreciated by the Western world.
Today, we have Mitchell Green at Lead Edge joining us.
In a world of fluff and framework-thinking investors, Mitchell Green is a moneymaker.
Mitchell has co-led or led investments in insane companies like Alibaba BenchLink ByteDance Grafana, among many others.
I think 50% of people in the venture business should not actually be in this.
There's too much money. and there's like too many tourists.
50, 60% of people in this industry that actually probably add negative value to companies.
People that spin out of like Anthropic or OpenAI and raise money at like 2 billion for a freaking idea.
Like there's nothing more than an idea and a napkin.
To us, that seems complete lunacy.
There's gonna be a really big downturn.
Markets just don't go up forever, and I think it's gonna happen in the next 10 years.
Buying is glamorous.
Selling is the job.
Don't count China out.
I bet they win the AI world.
Ready to go?
Mitchell, dude, it is so good to have you back in the studio.
I love doing these with you and Larry are my favorites.
You know why?
You got to have a sign together.
No, it'd be great to have you on together.
If you're in London together, we should do it.
And we should do it actually over like a dinner and mic everyone up.
100% it'd be amazing.
Listen, I want to start with something that's actually quite disarming for a lot of investors today, which is bluntly, the saspocalypse, the sassica.
And we're looking at the markets and they're just in the shitter.
And I think there's a lot of people who are questioning whether they are actually good investors or whether we were just in a bullion cycle.
Is this justified in terms of the downturn or is this an overreaction to AI and anthropic product releases?
We are buyers.
We're buying software stocks right now.
A portion of our funds can be invested in public equities.
So we're buying companies like Procore, Workday, Appian.
We love Clearwater Analytics, but it's in the process of being taken private, so the stock doesn't move.
We're big investors in Toast, which we've been buying back.
We were early investors in it and sold and are rebuying.
These companies aren't going anywhere.
The incumbents have distribution, data, and balance sheets.
It's a fool's errand to think all these companies are going to go away.
Not being said in any period.
When there is big periods of disruption, there will be new companies that are created.
There will be incumbents. that thrive and adapt, and there'll be some incumbents that blow up.
Help me understand.
I love your perspective, but I don't understand it.
Workday's at 6.8% growth.
Now, we're seeing the cannibalization of the seat model.
We're seeing, bluntly, no impressive use of any agent products within the existing incumbent set.
Well, Workday's AI business is growing super fast inside it.
Keep in mind, they are $10 billion of revenue and like $3 billion of free cash flow.
So there is law of large numbers for a lot of these companies.
You know, look, it is not normal for companies to grow like Anthropic or OpenAI have.
And oh, by the way, you know, Workday does it with serious profits.
Or a company like ByteDance grows it.
You know, 30 a year with massive profits.
Like, let's see what these companies would, how they would grow if they had profits.
But For seat based pricing for Workday.
Workday is more tied to employment growth in the United States.
But the company is like a low teens, high single digits grower.
But again, it is a huge business.
It is like a $10 billion revenue company.
I actually think what people got wrong and why a lot of these software stocks have actually sold off, looking back in hindsight is if you looked at the end of last year, street numbers were too high for this year.
Just in general.
Like they didn't show enough de-sell.
And what I mean by that is you'd have a company that was forecasted to grow like you know.
That grew 20 last year where the street thought they would grow like 195 this year.
It's a lot of large numbers.
As companies get really big, they de-sell.
And street numbers in general, all across software were too high.
And so what will happen is, you know, Wall Street analysts sell side analysts are, like you know, like squirrels, and as the stock goes down, they're like oh, now we got to lower my numbers and take the numbers down.
And a lot of big public hedge funds or public market investors.
You don't want to own stocks when numbers need to come down.
You want to own them when numbers are about to go up, so estimates are about to go up.
So what you're going to see is they're going to take numbers down at a bunch of companies.
Give it a quarter or two.
Companies will start to then beat numbers and they'll raise the numbers and the stocks will start to work.
But it's probably dead money for a little while.
I was always a big fan of Howard Marks and his investor letters.
And one of his big things is, you know, never try and catch a falling knife.
And so I see what you see in terms of the opportunity, but I'm like I have no idea where this is going to go.
And honestly, a month ago, I was looking at Duolingo going, wow, what a buying opportunity.
And the lesson I have on Duo is, wow, there really is no flaw.
If you don't have earnings or EBITDA, there is no floor in a lot of these things.
What we tell people is if you want to own them, just buy them over.
Like you know, buy them over a month long period or buy them on down days.
But just like, if a stock's for an individual and you think you want to own a million bucks, 200000 of some name, Buy 50000 every time it dips and sells off hard.
And maybe you'll never get fully filled, but you won't catch a bottom.
But the funny thing is, if you actually do the long-term analysis on buying just indexes like the NASDAQ or the SP, it actually turns out just like if you look at very long-term longitudinal data that if you just actually just buy it on a big down day, it's nearly impossible to try to time it.
We mentioned Workday.
We also have seen recently in Workday, Anil Bushri, the founder, coming back.
Not specifically about Workday, but I'm unwaveringly negative on companies where the founder is not the CEO, and we're in this AI transformation.
Do you share that non-founder-led companies are inherently disadvantaged?
I would agree with that partially, though I do think there are very good CEOs.
You need like a growth mindset.
And I believe that there are companies that are run for growth and there are companies that are run for margins.
And I believe, in any time you have big technological transformations, that you want the management team that is run by the company that is focused on growth.
And by the way, those are oftentimes entrepreneurs.
Another way to think about it is oftentimes, when companies are run for margin earnings, or EBITDA margin, they're oftentimes heavily levered.
Where I think the biggest opportunity to disrupt incumbents today is soft software tech enabled services.
Any company actually can be a manufacturing company, it doesn't matter any company with a bunch of leverage on it, because those companies don't have the cash flow to innovate.
And, by the way, you can look at 99 and 2000 and look what happened.
And so if we had sat here in 99 we would have debated are all the traditional retailers going to go bust and are all these e-commerce companies going to be gigantic?
If you look today at the 10 largest e-commerce companies in the United States, six or seven out of 10 of them are traditional retailers.
They're people that were on way before 99, Walmart, Target, Home Depot, Lowe's.
However, there were a bunch that went bust too.
Sears, Kmart, Montgomery Ward, Bed Bath & Beyond.
And you have to ask yourself why.
And most of those companies had huge amounts of leverage, so they couldn't innovate.
Whereas like Walmart, we didn't have leverage.
And they're like, we're going all in.
We're going to like bet the company on this stuff.
And you're going to see the same thing.
I think today there's many things that want to somehow.
You said you run a company for growth, you run a company for margins.
Yeah.
If we take like a Meta and a Zuck, he's running it for growth, which is why free cash flow is in the drains.
And now I think it's valued at like 1,100x free cash flow.
Well, the CapEx burned for all these things.
And he's being pummeled for it.
Yeah.
Is it right to pummel him forward or is he in the right mindset for growth?
This is the million dollar question.
Is Apple right?
Or is Google, Microsoft and Meta right?
And you know like Apple spending very little right now, you know, and those other three or four companies are spending insane amounts of money.
Time will tell.
It's probably somewhere in between is actually probably the right answer.
I would argue though if you are – it's interesting.
Mark Zuckerberg deserves to go for it.
It's his business.
He built the damn business.
I don't think you really have much to say to be like, oh, don't bet on the guy.
He kind of has to because his competitors are doing the same thing as well.
So look, I mean, our view is that ByteDance is the most advanced AI company in the world.
And you know it's very underappreciated by the Western world, like how much AI they use and how much they're investing in it.
Our view, AI is going to change the world.
It's an incredible thing.
Now again, though, we sat here in 99, the word social media doesn't show up.
Who would never have talked about Facebook or anything, right?
It's $3 trillion in value now.
AI is not going to be about the next call center company or the next workday.
I truly believe what we're seeing right now in the AI and people investing in a lot of these AI companies across the board.
Look, some of them are going to be gigantic.
A whole bunch of them are going to bust out, are going to bust.
But I actually think it's the stuff that's going to start over the next two to five years.
Those are going to be the giant businesses.
And I don't even know what it is.
We're going to go back to bike dance, but then do you agree with the play?
The game on the field analogy.
Or do you actually think there is such moving sands that actually an optimal strategy is to be conservative, not invest a ton right now, given the transience of markets, and sit and wait for some form of new equilibrium to emerge?
That's a great question.
I think it depends on what business you're in.
If you are an early stage venture fund where returns are made you know 100 Xs or zeros you should be investing in stuff.
No, I think you should.
We like to always ask if I make an investment and it grows for like 18 months and it hits my numbers, am I like now in the money?
The problem is when you invest at 100 times revenues or something, you can go at some crazy rate for 18 months and you're like well, I'm still nowhere near in the money.
So we always like to ask ourselves for that.
But if you're trying, like we're in the business of trying to make two to five times our money in three to seven years for like a 25 IRR And like we don't drive zeros,
Like we don't – we also don't have 20Xs.
I think we've had like two 10Xs ever or something like that.
But we've only had like one or two zeros ever.
And so it's – this environment for us is just kind of – it's different.
Are you finding it hard?
It is definitely harder to invest today than it was – in 2017 for sure.
Although there's like different pockets of opportunity.
You know like the secondary market for us right now and it's like exploding and like our special sits business.
You know we just did a deal in a company that you know in a special set and put 200 million to work.
And the company is now raising around it like 2x the price, you know, we invested at.
And literally it happened a month ago.
I don't understand.
When you look at a lot of the growth equity investments that you and a lot of people have made in the last years, are they not made a lot more vulnerable in the new environment that we sit in?
The well-priced company up north in the UK that's doing accounting whatever.
Look, one of our companies is Grafana Labs.
It's a giant business growing crazy fast, and it's benefiting from a lot of this AI spend.
Their customers are a bunch of, are some of these big AI companies.
But I would say that's a straight down the fairway Silicon Valley deal.
It was Sequoia and- Yeah, but when we invested, nobody knew what the company was.
It was a bootstrapped $12 million software company.
Us and Lightspeed were the first two investors.
It was bootstrapped.
The guy had actually built a $12 million company.
How did you find it?
Cold calling, cold calling the CEO.
Cold call.
So we have a team of 18, 22 to 24 year olds.
Like pounding the phones calling companies all day long.
Learned from insight.
Yeah.
So by the way, and they just replicate it with Summit and TA.
I just had Jerry Murdock on the show.
Yeah, he's fantastic.
So if you, if the company calls you back, it's like, hang up the phone.
It's the CEO you call every two days for a month.
That's who you want to get on the phone.
And look, people are building. like amazing companies.
Like we have a business down in Florida that makes called Pacemate.
It makes cardiac monitoring software.
So if you put like a pacemaker in your body or a defibrillator, it takes the data off the device.
That data then is sent to the manufacturer's website.
There's lots of different manufacturers, lots of different models.
This is like single pane of glass software for cardiac clinics.
By the way, it is like a 99% gross dollar retention business.
These guys, when we first invested, it was like 20 million in revenue.
I had raised eight to get there, but only burned three.
It was growing like 50% a year.
I don't know, it probably did like 45 million revenue last year, a few years after we invested.
But we're using AI to benefit.
Like we have a huge amount of people in the call center, or like in the customer service.
Like analyzing the data, make sure all this stuff is working.
The company can now continue to grow and not act.
I mean, they don't have to fire all these people, but they can keep the same number of people and make people much more productive.
And I think that's what people are missing.
I think there's two things.
One, this is going to lead to a giant productivity boom.
And two, software companies have never been about R&D.
This is not semiconductor investing.
It's very different.
So if you were to look at your average software company that goes public, if you look at cumulative spend since inception, it's usually around 30 is RD.
So a huge amount of these businesses are about sales and marketing distribution, customer support, things like that.
But AI will help a lot of those things.
Are you worried that we might see?
I'm sure you read the Citrini research piece or saw it come out and wipe billions off the stock market, essentially saying that- But that's a more incredible thing.
What?
That some random person can write a research report.
Imagine if we had Twitter in 2008.
It's incredible.
It's amazing that people are listening to some random research firm versus listening to people like Stan Druckenmiller, Howard Marks, Ken Griffin, Steve Cohen, Mark Benioff, people like Mark Zuckerberg, Jensen Wong, who's like software is not dead at all.
Yet a random research firm can get 25 million views and takes it off the stock market.
It's crazy.
Is this not the ultimate sign there that we're seeing the casinoization of public markets?
Yes.
Which actually makes it, by the way, that's the opportunity for long-term investors.
Like you buy, you know, as Warren Buffett said, you buy when people are scared.
Like you can make, you'll be able to make lots of money.
Or the flip side.
You don't want to take part in entirely irrational markets which are no longer tied to value.
Look, I was working at a hedge fund seeded by Julian Robertson in 2008 and 2009.
This is nothing like this.
This is like amateur hour.
This is like nothing.
Like this isn't even volatile compared to like what was going on back then.
The market was whipping, the indexes were whipping up and down like.
8% in like intraday moves.
Like you'd have 15% swings.
But that presents the opportunity.
By the way, had you bought in like 09 or late 08, you know, and bought great companies, you could make a ton of money.
And so like, this is the opportunity to buy stuff on sale.
Now again.
Okay, I'm going to push back on you there and say there was no fundamental technology inflection point in 2008 which could render an incumbent set relatively redundant, which there is today.
The mainframe business is still a $5.5 billion market.
Mainframes, they came out in 1950.
Most banks are run off of mainframes.
Oracle is a legacy software company.
Microsoft is a legacy software company.
SAP is a legacy software company.
They're some of the biggest software companies in the world.
These companies are not going away, I will bet, any amount of money.
Now there will be some that will focus on the companies that have 90 95, 98 gross dollar retention.
Now there will be new giant companies created 100 but most of these incumbents will not disappear.
Like some of them will innovate and become exponentially bigger.
Some of them will grow five, 10% a year.
I mean, there are a ton of software companies that have been around, you know 20, 30 years, that are still growing.
And, you know, I actually think the biggest disruption you're going to see is in like manufacturing is in, like healthcare is in, you know, think about like the companies that can figure out how to get drugs to market much faster than anybody else.
Like, I think AI could potentially, like, huge parts of cancer could be solved.
Dementia could be solved because you can run drug trials faster.
Think about manufacturing.
If AI and robotics can come about, the company that you know, if you have two competing companies that make cars one's levered, one's not levered
The one that's not levered is probably going to be able to invest a lot of resources into.
You know, completely you know it's going to be hugely beneficial for them.
Totally get that.
Going back to what we were just talking about.
We're saying about the casinoization and how crazy it is.
We mentioned productivity increases.
Are you worried that we will see productivity increases but with that, less and less consumers having jobs and a weakening of consumer wallets?
Not really.
There were a couple million switchboard operators in 1980.
There's been lots of jobs that have been lost over the years.
Think about all the number of, you know, there's been retailers over the years that have gone bust.
People innovate.
And it's funny, I was just talking to somebody at one of the world's largest banks, a very senior person at one of the world's largest banks this week in London.
And his point was, look, we have... hundreds of thousands of people in like back and middle office.
Those people that we've trained them for five to 25, 30 years, right?
These people are not all going to, we're not getting rid of them all.
We're going to retrain them.
And, by the way, the people that don't want to be retrained will be okay.
Fine, go work for the government then.
Cause you know, you can do like old school jobs there.
But like a lot of these companies will retrain people.
They'll do different things.
It's remarkable throughout history.
There's been like lots of technological disruption over the last hundred years.
And people find new things.
If everybody's worried about everybody's going to lose their job, then don't invest in any of these companies, because it would be a complete disaster.
I guess I tell people, if you're worried about China invading Taiwan, you really shouldn't worry about your bite dance position, because you're going to have a lot bigger things to worry about.
At some point, by the way, the government would get very involved.
Like if, all of a sudden, all these jobs start to disappear and you have 10 20, 30 unemployment.
It's not happening.
First of all, people always think this change comes faster than it does.
Most big companies that are like financially regulated, you can't even go on to Claude or chat GPT.
Like you can't even like get on the system to do work.
And by the way, we're still five years in.
It's literally like people woke up a month and a half ago and were like, oh my gosh, all these companies are gonna go away and like unemployment's going to 30.
It's nonsense.
It's silly.
Like we're going to sit here in 10 years and we're going to have like it's going to be an amazing time to invest.
You're going to have a bunch of amazing new companies come and created.
Well, you're going to have a bunch of them.
You'll have some legacy and companies that went to zero.
Not all of them or anywhere near all of them.
You're still going to go to retailers.
You're still going to get your hair cut.
I just think it's going to be an amazing time to invest.
By the way, during periods of volatility and the casinoization of the stock market, you want to buy fundamentally good businesses on multiples of earnings.
Do you worry that the world is just being memed?
That the world has been cauchified?
Yes.
The world is just a fucking cauchy and poly markets replica.
It's totally insane.
Is that a momentary thing?
Or is this a new world of social media, dopamine junkies, real time?
It's a great question.
Look, I mean, I've joked for years that social media is like the demise of society.
Look, I mean, Jonathan has done amazing research on, like you know, this stuff needs to be regulated.
It will be regulated.
It is incredible how fast information moves, you know, right?
Just imagine if Twitter had been big in 2008 and 2009.
It's absolutely incredible.
Now, I will say that the makeup of the stock market is different today than it was 20 years ago.
Passive ETFs are much bigger.
The retail stuff comes and goes, like retail trading, but you just have to buy good businesses when they're on sale.
I like buy good businesses at multiples of fundamental.
If you don't have earnings, there is no floor.
But if you have earnings like in free cash flow, then you know Another thing that people, The reason a lot of these stock or stocks and internet stocks are actually still not cheap is because
The stock base count.
Like the stock base count in a lot of these companies is totally nuts.
Like the amount of equity compensation and dilution of like shareholders is very high.
And I'm actually surprised more people don't talk about it.
Why are we not talking about it?
What do we not know that we should know?
Are we in a new norm for the Snapchats and open AIs of the world to have unreasonably high SBC and no one question it?
Some of the big public market investors have been questioning it for a while.
It's surprising that more people don't talk about it.
And just look how much stock option dilution there is at a bunch of these big Silicon Valley companies.
It's not as bad outside of Silicon Valley, but the dilution is real.
I'm surprised more people don't talk about it.
What should happen?
Like if you're a snap holder, Avan is running a gifting program right now.
I don't know.
Look, we're not activist shareholders at all.
I have a lot of respect for entrepreneurs like Larry Ellison who effectively did a levered recap of Oracle. you know, he basically was like, I have all this, free cash flow.
I'm going to borrow debt and buy back an enormous amount of stock.
And what did he do in the process?
He didn't sell any of his own.
So he just kept making it.
He'd make sure it can't go down, not up.
People forget that in companies, there's, you know, it's market cap equals number of shares times price of shares.
And so you know, and to Companies that respect, you know, that have discipline on that, I think are powerful.
We've seen so many names that are so well known be in the dumps.
And a lot of people are questioning oh well, are the CEOs and the management team buying when they're in the dumps?
You know, the ServiceNow CEO who bought $3 million worth.
I mean, I think Salesforce just came out and said they're going to buy 50 billion of stock or some crazy number.
It was like from the earnings report last night.
No, I agree with you.
By the way, companies should be buying back stock.
Those that aren't buying back stock, you should question and ask why.
Okay, but ServiceNow bought $3 million worth, okay, which is less than his car collection.
I don't know, is the company buying a lot of stock back?
I don't know.
But you have to also ask, how much stock does the CEO of ServiceNow already own?
Does he own $300 million of stock?
That should tell you something.
The companies where the founders are buying or the companies are buying huge amounts of stock back Like that to us would make one more bullish on that company versus like another company 100.
I would suspect over the next, as earnings come through, you will see more things like sales, like Salesforce.
People put in place big buyback programs to start buying back stock here.
I think you'll see it.
We spoke about ByteDance a little bit.
Everyone for years has been like, oh, the ByteDance discount is so cheap.
ByteDance is insane because there's the China discount and ByteDance is the China discount on the China discount.
That sounds great, but it's only good for you as an investor if that discount chasm shrinks.
What's it going to take for the discount chasm to shrink?
I think it already, to some degree, already is.
So private market implied valuation multiples should be, you know, determined by public market investments.
So, like you should argue, a software company today like should be getting down in the private markets cheaper than public markets.
It definitely doesn't always occur like that.
Look so Alibaba and Tencent should be two giant Chinese companies should represent roughly how ByteDance should trade.
I haven't looked at them in the last like couple weeks or month.
They were trading like mid-teens earnings multiples, not EBITDA, not revenue earnings multiples, and they don't really grow.
Now this is a business that you know grows 25, 30 plus a year, generates a tremendous amount of earnings and you can stick like and earnings multiple on those companies, on this company, and get to a very, very big number like fundamental earnings.
And I think Facebook's trading like 25, 30 times earnings right now, like stick that multiple.
But maybe that's too high because it's a Western company.
So then put the China company multiples on it.
I think it is possible to see in a few years that this company is doing, you know 70 80, 100 billion of earnings in the next five years.
Yeah, but in a de-globalized Trump world.
I'm just doing the kind of alternate argument here just to understand.
In a de-globalized Trump world, it's not going to list in the U.S., is it?
0% chance we'll list in the US.
I have no clue, but no, it'll list in Hong Kong.
That's where a lot of these People have been talking for years that they're going to delist all these Chinese companies.
Baidu Ctrip Baba.
They never did.
Keep in mind, like Alibaba and Tencent or Alibaba stock has like doubled off the lows over the last year.
So like sentiment today on China is a lot better than it was 18 months ago.
When we were buying ByteDance stock, like you know, We were buying it at prices around 200 billion.
We thought the risk-adjusted reward, given the earnings power, was just incredible.
I also think that don't count China out.
I bet they win the AI world.
I bet they win it.
When it's not right.
But like look, the great thing in China is you can build a nuclear power plant in a couple of years.
You can build power plants like no problem.
In the US, we are going to run into major issues around power.
Why do you think they win the AI world?
Just because Because of the power, resources consumption, like number of PhDs, like how much they value science and technology.
And I think power is a real... And like, look, there's things that could totally change it.
Like nobody's really talking about quantum.
We are not quantum experts at all.
But is that something that could make these things like exponentially more efficient?
How does that realization change how you invest?
I completely hear you and I agree.
I think we still dramatically underestimate the capability of China, or just choose not to think about it or push it to one side.
But if that is the realization, how does that impact your go-forward mindset on investing?
That's why we own a lot of ByteDance.
But it's not like winner take all.
It's not that ByteDance wins and like Google and Facebook loses.
A year ago I was probably on the show.
I don't know if we had talked about Like Google.
Everybody thought Google was going to lose.
They're like, ah, Google's dead.
It's done.
Nobody's going to search it.
Seen the stock in the last year?
Stock's like doubled.
Now it's going to win everything.
Now it's going to beat OpenAI and all these other things.
No, like they're both going to be fine.
The biggest question for us on these LLM model companies is can they ever turn like a real profit?
I just don't know the answer.
And I don't think anybody really does right now.
But again, I think another thing you're going to see in the United States as it relates back to power and you really haven't seen much of it yet is local communities getting like really upset.
Like you're the small local town in Iowa, or the small town in Kansas or Ohio or wherever in Virginia.
And they built this giant data center.
They employed all your people.
They employed a ton of people locally to build it.
They then built it.
Now it sits there and has 50 local people that work there and your power, your power, local power.
Prices have tripled.
And like, is it polluting the environment and things like that?
It's this big, ugly building.
I think you're going to see real local pushback.
And I don't think it's only the United States.
I think it's probably Europe as well.
And it's like hey, These people that are not better off today than 20 years ago, and these things are in their backyard and people in Silicon Valley and the coast are making tens of billions of, hundreds of billions of dollars off.
I'm like, I think there's going to be real pushback, and there needs to be regulation on it.
Do you not think climate is a luxury problem?
We were also worried about it in the last three to five years, and now no one gives a shit about it.
We should be worried about it.
Climate investing is in the drains.
We should be worried about it.
It's probably important.
Look, we've always struggled with how to invest there because of how capital inefficient a lot of those businesses are.
And I think just China has some advantages in that respect, whether it's like giant solar farms they can build or whether they can just do things that we can't do.
But I would expect...
If you look at the internet, the biggest innovation in internet is usually over the last decade or 15 years is coming out of China.
Like, if you actually want to look where like e-commerce is going and like social media is going, is go look at China.
But that could happen in...
It was not a surprise to me when Deep Sea came out.
But don't underestimate like Chinese creativeness and like ingenuity to like figure out how to like reverse engineer and engineer things in much cheaper ways than Americans can do.
Can I ask you, going back to the not specifically on the ByteDance, but I actually really want your advice on the sell side, which is like when you look at a ByteDance, there's many opportunities to sell in a lot of these names.
So not taking ByteDance specifically.
How do you think about, you know what, we're 3x up on where we are.
We've been in it for four years.
Let's take chips off the table.
How do you think about sizing positions over time?
And have you got any big lessons or advice for me on that?
Buying is glamorous.
Selling is the job.
Constantly re-underwrite.
That is actually what it really is.
And we're trying to make two to five X in three to seven years.
If you put that on a curve that's a 25 IRR curve put it into a fund.
Make it two to two and a half X net fund.
That's what we're trying to do.
That's what we tell our investors.
So we're constantly just re-underwriting to saying like okay, like if we were going to sell a bunch of ByteDance today at 550, which is you know where it's been reported that like, General Atlantic is selling a bunch and there's other people and we've been offered higher than that.
And so I think it's always like, what is the probability it can double?
And then we to invite Dan, we look at like what fundamental earnings are and be like okay, this is double window problem.
Now, if somebody came to us today and said, hey, I'll offer you $1.3 trillion, we'd sell a bunch.
Because it's not that I don't think.
I think the company will do 100 billion of earnings in the next five years.
And at 20 times, that's worth $2 trillion.
But there's a risk.
What does it trade out on a multiple basis?
What would we be on our total investment at that price?
Sure.
And how far ahead are you paying for growth?
And at a point, there's a really valuable moment to go, yes, you're paying four years out.
Oh, yes, correct.
What we like to say is this.
I think this has actually kept us out of a lot of trouble too, which is like are we in the money 18 months out?
Like, that's what we think.
With a reasonable multiple, are we in the money 18 months out?
And, you know- Can you like unpack that?
What do you really mean by that?
So like if we invest today and revenues are 20 million with a reasonable model At 18 months out, are we in the money?
Like with a reasonable multiple, not 50 times revenues.
But do you worry with your companies like the Pacemaker company?
I don't want to pick on them.
That's fine.
20 to 45 million, which is great, phenomenal, fantastic.
But who's going to buy that company?
I mean, there's a line of strategics that would buy it.
There's private equity firms that would buy it.
At a good multiple?
Yeah, we'd make great money.
By the way, you know, we forgot what did I pay for it?
Like, you know, good investment and good company are two very fundamentally different things too.
And you're trying to like get the union of both of them.
Like there's a lot of A plus companies at D minus prices.
Nor do I also want to buy a D minus company at an A plus price.
Do you not want to make that investment?
I'm always taught by most people on the show that I've never made money with a good deal.
See, like I would strongly disagree with that statement.
Like there are a lot of people that invested in good companies or great companies in 2020 and 2021 at really stupid prices and didn't make money.
So it's like, it's the intersection of both.
It's not like you're not trying to buy a D asset at an A plus price, that's like zero.
But like if you can buy a B plus company at an A plus price we have over the last 20 years, you can make like amazing risk adjusted returns.
But we also buy A plus companies too.
And you can buy like.
The great thing is is, can you do like structured secondaries or can you do like really unique things, like some of the stuff Larry will do and will do.
And can you buy an A plus company or an A company at like a B minus C plus price?
Those are like incredible deals.
Can you get in like cheap through buying out old LPs out of an old fund that need liquidity?
By the way, I joke that we're an Nvidia earnings miss away from like a recession.
By the way, if you get that, a bunch of old funds are going to be like – they have horrible DPIs.
You're going to have all these LPs that are like, you know what?
I'll sell an interest in this 2013 fund or this 2015 fund and be able to buy stuff super cheap.
But look, there are also different beliefs.
People are just like, oh, look.
There are a lot of people in the venture business that are just like I will pay anything because I'm trying to get like the power law and I'm trying to find the next Google.
Would you not advise me though that actually, when you have a world where upside is relatively uncapped and you have trillion dollar companies, or at least many more hundred billion dollar companies,
I should be so much more elastic on my pre-billion dollar entry price and paying 300 or 600.
I know- No, because most companies don't become that.
Like the vast majority.
It just depends what you tell your LPs, by the way.
We tell our LPs make two to five X in three to seven years, rinse and repeat, generate two to two and a quarter X, two to two and a half X.
Net funds with 29 hours.
And it turns out, if you can do that over like a 20 year period of time, you are like the best of the best.
Dude.
I'm very good friends with Jason Lemkin from Sasta who on a show with me very recently said oh fuck this, picking winners early stage stuff.
I just want to do an anthropic SPV.
It's much easier.
It's not easy to do this stuff.
I think 50% of people in the venture business should not actually be in the business.
There's 50% too many VCs.
Maybe more.
There might be 70.
Actually, it's not only VCs.
It's private equity, alternative access.
What makes you say that?
There's too much money and there's too many tourists and there's people that don't show Investing.
You need to show discipline on price.
Go talk to the greatest venture investors on the planet, and they'll be like price matters at the end of the day.
Again, let's see what all these companies get out at at the end of the day that are valued in the trillions of dollars.
There aren't that many of them to be clear, right?
And look how much earnings a company like Facebook and Google and Microsoft and Amazon and Nvidia generate like profits.
I think there's a lot of companies that are way ahead of themselves in terms of like valuations and what their profit numbers will be at the end of the day.
Do you think we will have more or less money in venture in three years time now?
Probably less.
At some point, I don't know if it's three years or five years or seven years, for sure.
People are going to wake up in 2030, in 2032, and realize it's oh my God, they're still all in this stuff from 2012 and 2015.
If you weren't selling, when are you going to sell?
That's actually the best advice I would give to young fund managers and like people starting funds, is liquidity windows open and close.
And when they are open, take advantage of them.
Like you should be selling even if you're winners.
Sell 20, sell 30, sell 5 and continue to again.
Your job is to return money.
Companies are bought, not sold.
I guess marks are opinions.
DPI is math.
And so like you – no, companies are bought, not sold.
That's not true.
But you don't have to sell the whole company.
If there's a round being done in a company that you're investors in, especially if you're a small new fund, you can go to the founder and be like oh founder, you've taken some money off the table.
Like I won't be in business in five years if I can't get some liquidity back to our, back to your companies.
And by the way, you can do the math.
If you build the next giant company and you sell some at 500 million or a billion, like who cares?
Like you still own 80, 90% of your whole thing.
But like LPs want money back.
And the people that stay in they're going to be in business 10 15, 20 years from now are people that will continue to give money back to their investors.
Are you seeing LP sentiment change today around what they care about, do you think?
Absolutely.
I think you've already seen it.
So we've always cared about DPI, but I think that we've always been really disciplined.
Two to five X, three to seven years, like...
Hit it, move on.
Probably a third of our deals have been secondary sales.
So people have accused us of being traders.
That's fine.
I guess I'm a trader.
But you know what?
I gave money back to my investors.
And guess what?
The investor, like... is my client.
I have two clients, entrepreneurs and investors.
Without investors, I don't have any money.
I don't have a business.
And so I think people need to remember who pays the bills.
And I do think that investors are very, very, very focused on DPI now.
And I think, if you are And it is possible, with a small early stage fund as a new relative upcomer in the first couple of funds, you can actually generate amazing APIs.
It's a game you can play.
I don't know if you've ever had like Fabrice Grandin here or Jose Marin from like FG Labs.
Those guys are like 10, 15 year LPs of ours friends.
Those guys have played the game extremely well.
They understand that not every company goes to the moon.
Take some chips off the table, give it back to your investors.
Rinse and repeat.
I think the advantage that a lot of these small funds have that most people don't consider is they're able to sell so much easier without really disturbing company progress at all.
If you're going to respect him, he can sell very easily and it's not a big problem.
If you are Sequoia.
Correct.
It's hard.
It's like negative signaling 100% versus that's what I'm telling younger funds.
You can be like to the entrepreneur, hey, you're selling some stock.
I really need to sell some stock here.
Why?
Because if I don't return money back to my investors, like I won't be, We won't be talking in three years because I'll need to find a new job, because I won't have my second fund.
Do you worry about being a trader and not being an attractive investor to founders?
Nope, because I believe if you help founders and do what you say you're going to do.
Now, a lot of investors don't do that either.
I think there's 50 60 of people in this industry that actually probably add negative value to companies.
But the simplest lesson I think for entrepreneurs Anybody can learn, and I learned it early in life.
It's just, if you say you're gonna do something, actually do it.
It's like the number of people that over-promise and under-deliver like be the reverse under-promise, over-deliver.
And so if you've been really helpful to an entrepreneur, helped them recruit, helped them recruit, helped them with customers, you sell 20 of your old ends.
Who cares?
Keep helping them.
I mean, we have companies we've sold 100% of that we still help drive customers to.
It's like, by the way, great, you helped me make five times my money.
Nobody else in the cap table is liquid.
We sold all of our stock.
Keep helping you, please.
What are the most common ways you see investors provide negative value to companies.
For founders listening that they should watch out for.
Burn money at all costs.
Recruiting.
They actually just act like they know how to run the business.
I've never run a company in my life, by the way, nor have like 98 of venture investors or private equity investors.
Get people around the table that have done what the entrepreneur is trying to do.
So if like you're a $20 million AI company or a $20 million software company, find entrepreneurs around the table Help the founder recruit people that have built businesses from 20 million to 200 million and get them around the table and get out of the way. is truly the advice that I think.
And like, I just think there's too many knuckleheads.
You know, the worst is somebody you know who went to Stanford Business School, worked for 18 months at a startup and now comes in you know, is a venture investor and now they're experts, right?
Like I just think it's be humble and don't act like you know, because most of these Bobby myself included have never actually run.
If you want a sort of venture fund or growth equity fund, I've done that.
I can give people advice on that.
But, like if you're trying to figure out how to build out a great sales team, go talk to great sales leaders.
And get advice from that.
So I actually think that's the best way that VCs and private equity people can help founders and entrepreneurs is connect them with people who have done it before and help them recruit.
I truly think that's why Sequoia and Benchmark are great and Index are great, because they help founders and entrepreneurs recruit amazing talent.
And people want to work for those funds portfolio companies.
Dude, I just say I'm a switchboard.
I honestly just feel like the women in the 1960s, you know, connecting people all day.
Because I'm like, no idea how to do that.
Speak to my friend down, CTO.
100%, great.
But no idea how to do that.
And I think that's what the best entrepreneurs actually want.
100%.
Here's my mid view from seeing a load of companies.
No, don't want that.
You said that like, oh, a negative value is like, hey, burn money, burn money.
They say burn money, burn money because they need to see growth.
And they are looking at markets today going for me to get my next round of funding.
The game's changed.
It's no longer triple, triple, double, double.
It's I need you to go from zero to. to honestly 30, 40 for this to be interesting.
Well, that's about right, because that's the price that they paid in the deal.
Like if you paid these asinine prices on the way in.
By the way, what's really interesting to me in the market right now And we don't even see any of these deals because it's not what we do
It's just like people that spin out of like or like leave Anthropic or OpenAI and raise money at like 2 billion or a billion dollars for a freaking idea.
Like there's nothing more than an idea and a napkin.
To us, that seems complete lunacy.
What I actually want to know, have any of those ever actually worked ever?
Like has anybody ever raised, at some crazy price, initially just like on an idea, on a napkin, like billions of dollars or 500 million?
And have any of those things actually ever worked?
I don't know.
Anthropic?
What was their first?
I don't know.
When did like Dustin Moskowitz invest?
I think it was pretty small.
It was like billions.
No, no.
I think the original seed deal was like much lower than that.
I don't know is the short answer, but I thought like when Dustin and some of these guys invested like the seed, it was like much lower, but I don't know.
I mean, the astonishing thing is, Dustin will make more money from his anthropic investment than he will from definitely from Asana.
Definitely from Asana.
I don't want to be hung up.
Facebook though, I'm not sure.
Yeah, I'm not sure about that.
We said about kind of burn money and they want the growth.
It's the triple, triple, double, double debt.
There's so many SaaS founders who ping me every day and they're like I've been told for 10 years you know triple triple double double, and then we'll be in a good place to raise our next round.
I'm in that third year where I've doubled and I'm now gone from 10 to 20.
And no investor wants me.
I think it's, by the way, call us.
We think those things are interesting because we can get them at potentially good prices.
That's where it matters.
Like, what is your gross dollar retention?
So here's the deal.
It's the most important number in tech companies.
Gross dollar retention.
What I mean by gross dollar retention too, because everybody wants to quote Nets, is gross dollar.
You ended 24%. with, you know, 2024 with 20 million revenue.
What did those same, what did you end at 2025 with just those same customers?
No upsells, just downsells.
You know, 18 is good.
Like you want like 90%, anything less than 18, we won't touch.
Great is 19, incredible is 19.5.
Like you're looking for 90% gross is good, 95% is great, 98 is amazing.
Now the problem is and, by the way, the reason why there's so much dead wood in venture and, like all these living dead, there are so many companies with like 60 70, 80 gross dollar retention.
Yeah, good luck.
It's not when you're 10 million in revenue that's the problem.
It's when you get to like 150 million in revenue and you have 70 gross dollar retention.
You're just churning through.
And so that's why the company that's got 95 gross dollar retention can grow really fast and not burn much money, because they're not spending money on sales marketing to fill up the bucket.
If you're a Toma Bravo and you've got your Coopers and your Anaplans, where the companies are kind of growing at best mid-teens.
What happens to this generation of growth equity PE investors in tech?
So I think growth equity and like... buyouts are very different.
I think even buyouts are very okay.
Like I think like people like Hellman and Friedman like, if you want to go to the large cap, people like Hellman and Friedman and people like Primera are probably slightly more growth oriented.
And there are other firms that are probably more like margin focused.
I think it's probably a function of how much debt they have on their companies.
To be honest, I have not looked and spent tons of time like studying the financials of Coupa Software or Anaplan and things like that.
If I was them, like I know that all these companies, they drive EBITDA margins from 5% to 40%.
And the question is, how are they doing it?
Which I actually don't know.
I would hope that they've done it mainly through, like cutting really inefficient go-to-market and sales marketing and GNA.
I would hope they haven't taken the engineering sales headcount from 200 to 20.
I suspect they have not, but that would worry me if they had done that.
But I suspect they have not.
But these people are really smart people.
And the question is, if those companies have been bought with no debt, then they would be investing hugely, I'm sure, in AI and stuff like that.
They probably already are.
But, like for me.
That's why what I said at the beginning, we worry about any company and any big technological disruption that is levered with a lot of debt on it.
Regardless if it's a software company or a manufacturing company or an accounting services firm or an industrial services firm, whatever.
Like with debt, you're just like hamstrung with how much you can do because you have massive interest payments to pay.
Do you not worry that, given the casinoization of public markets and the volatility that ensues from a Figma, where it rides up to where it is in the gutter, and Atlassian, which is posting accelerating numbers and it's down 76?
You buy a company like Atlassian.
That would be my argument.
Okay, fantastic.
I agree.
I think it's amazing.
Also founder-like company.
Correct, 100%.
If I'm Canva, I'm looking at this going, there's no fucking way I'm going out.
If I'm Stripe, I'm going, thank you.
I feel very vindicated in my decision to stay private.
Does this meme-ified stock market not just make- It's not good for LPs.
It makes the liquidity problem worse.
Correct.
So what will change it?
When LPs go to the biggest venture funds in the world and private equity funds and say we're not investing in your next fund until you get liquidity in these names.
That's the reality of it.
But I don't, I agree with founders, by the way, too.
I do think there are.
Look, there are companies.
There is something to be said for a company going public.
I'm friends with a bunch of guys that run big publics.
You just had equipment check.
Yeah, probably.
They went public.
Well, the stock's actually done quite well.
And actually it's like a derivative play.
So it was our derivative play on AI because build data centers, right?
You gotta like get a shovel and you gotta get like a dump truck.
But again, that was a company in 2020 and 21 that everybody thought was like a tech company.
It's not a tech company.
It's like an equipment rentals business run by a couple of awesome founders that are like that, are studs and like killers.
And you know we were able to partner with them to buy a bunch of secondary from people that were like desperate to sell.
And like, it's been an awesome.
So that's how you got into that business.
Yes.
Bought a ton of secondary.
You bought a ton of secondary from people who wanted to sell.
Yeah.
They were like, oh, this is a tech company.
No, no, this is an equipment rentals business that uses some technology.
It will drive higher EBITDA margins and better utilization rates.
And, by the way, they went public because they want to like.
They want to like, get their brand well known.
There are a bunch of companies out there you know, like the Vivas of the world and Datadogs, and why those companies go public.
Crowd strikes because big enterprise companies are like, hey, like, you know, how big are you?
Like, are you, are you like survivable?
Cause you have the big public companies like being like oh Microsoft, telling people like oh, this company's gonna go out of business.
You're like, not gonna go out of business.
It's like a $30 billion company.
And so like being public, you know, being public helps, I think with credibility.
On the flip side to the entrepreneur, I get why they don't go public.
They got a billion dollars of cash or $2 billion of cash.
But so I think it is.
So for us, it's really about finding entrepreneurs that we are very confident will be public company.
We talk to them upfront.
Listen, if your plan is to try to stay private forever, you're just not for us.
We just don't want to invest in you.
By the way, not because we don't disrespect you, but it's just like we need to get out of stuff.
Why, given the fluidity of secondary markets, if you spoke to a Collison who's like yeah, we absolutely want to stay private forever, and you're like great, but I can.
There's very liquid secondary markets.
Yeah, that's true, there is now um.
Our view is we want to back entrepreneurs.
If we think the thing has a very good shot at going public, we want to hear from the entrepreneur.
It's like, look, I want to go public.
By the way, you know how many more public companies there would be right now if these companies didn't have 600 million of cash in the balance sheet, or a billion dollars of cash?
If they only had $30 million, they'd all be public companies.
It's the amount of money that's available. for these companies is incredible.
Now again.
Now who knows if I have legitly no clue if like, Stripe is trying to buy PayPal.
But if they're trying to buy PayPal, they would probably rather be a public company right now to do it, unless they've got some sovereign wealth fund that's going to write them a 40 billion check.
So just help me understand, why would Stripe being public help them buy PayPal?
Well, how are they going to pay for it now?
I mean because if Stripe was a hundred and I don't know what, the market cap of 150 billion for Stripe
If Stripe was worth 150 and PayPal's worth 50 well, they'd have a liquid, publicly traded stock that they could then merge to get.
They would be a cash offer and then the shareholders of PayPal would get liquid stock and they would sell the stock.
That's an all-stock merger.
That happens all the time as public companies.
PayPal shareholders are not taking private stock in Stripe.
Like that's not gonna happen.
Public companies don't do all cash offers.
Now, could they go public in a reverse merger?
Maybe that's the way, maybe you reverse merger into PayPal again.
There is no freaking way the Colossus would ever do that.
The reality is, I think the only way it's a deal like that would happen then is like some sovereign wealth fund.
Private equity funds don't have enough money to write like $40 billion checks in the companies.
So if Stripe was really trying to buy PayPal again who knows if it's even true if they were, if they were a public company right now and they had 150 billion market cap, It would probably be less now, because the stock market had gone down or whatever.
If it was $100 billion, they would be able to do a public merger.
You could do one.
It gives them less flexibility to do big M&A, like really big M&A.
Obviously they have access to a lot of cash so they can go buy some billion-dollar company, no problem.
Do you think there is a massive disconnect between publics and privates when you look at a 150 billion stripe and a 45 billion ad yen and the same similar-ish transaction volume?
I'm not using them.
On those examples, I don't know.
Yes.
I mean, we see rounds get done.
You know, Wix is at $4.5 billion and Rapplet's at $9 billion.
Yes, correct.
Exactly what you think.
I mean, it's kind of silly.
It's like, do these private market investors look at the public markets?
So should venture investors have more flexible mandates that allow them to adjust to asset classes where there is most opportunity at a given time.
I think most.
I think look.
It surprises me that more growth in private equity investors can't do publics inside their funds.
I think he's optimistic, but like TCV can, I think Iconic can.
I think GA probably, so I guess probably these people can.
It surprises me that more people don't.
But I think like, early stage venture is extremely different than going to buy Atlassian right now, or going to buy Workday, or going to buy Salesforce, or going to buy Toast or something like that.
But what surprises me is that more If you were an early investor in Toast and you're fully out of it and you love the company and the stock's down like 60, why not go buy it again?
It surprises me more people don't do that.
Totally get that.
Going back to the equipment share style, you said about that size of IPO.
A lot of people say the $3 to $10 billion IPO range is just too small for anyone to care.
It's not meaningful in terms of size to actual markets.
Is that bullshit?
Or is that fair in the world where like, ETFs and passives have become huge and the number of fundamental investors is like shrinking?
I don't think you want to be a two to ideally, you don't want to be like a two to 3 billion company, but I don't think there's any reason you can be.
You can't be a seven to 10 billion company or five to 10 billion company.
I think those are like legit.
I think when you get like sub a billion or two billion, it's like it's kind of just like a pain in the ass to be a public company investor.
But you can do it.
Like who says you can't do it?
I actually, we wish probably more would.
Why?
Because they'd be great small cap stocks and they could actually you could hold them for 10 years and make a ton of money.
Like, look at Appfolio.
Like, the thing was like, I think like a billion, two billion, I think it was a lot.
I think it was like 700 million in our capital republic.
And I don't know what it's done in the last month or two, but like, it was like a 10x.
Look at Shopify.
Correct.
It's a $2 billion public company.
Yeah, exactly.
By the way, that's what you would hope for.
You want to find those next companies.
Saying you have to be a certain size in terms of publics.
If you apply that to funds, we see $15 billion Andreessen, $10 billion Thrive.
I think it's insane.
I think these funds are way too and they just do the math, the fun math on, like how they're.
Clearly you have to have the next open, you have to have the next Google effectively, or the math doesn't work.
I don't think.
And by the way, I've even heard people say like, you don't even have to have one of them.
You have to have like two or three of them.
The amount of money being thrown at some of these funds, and like the size of the funds, is astonishing to me.
I hope they prove me wrong because it's like good for me too.
If these funds get so big, these companies get so big, then they can buy a bunch of our companies like that.
But I respect people like Benchmark or Index.
Index has grown, but it's tough.
Index can raise as much money as it wants.
Yeah, and it's actually a billion five or whatever it is.
Index is tiny compared to these other funds.
By the way, those guys are the best in the world.
I think it just gets really hard.
It's crazy.
Why?
Let me push back on you there.
There's $9 billion in Thrive's growth fund.
If they are able to put 2, 3 billion into Cursor or into Databricks, you can very much- Yeah, but you have to underwrite 150 billion companies.
That's really freaking big.
But at steady state, companies trade at 10 times earnings.
I mean, that's just historically, we can argue, is it 12?
Is it eight?
It's steady state.
When they don't really grow, they trade at 10 times earnings.
If you invest in something that's worth 100 billion, you're effectively saying to make a double.
With dilution it's probably 250 billion.
That's making the bet it's going to do $25 billion of earnings.
There aren't that many companies that do $25 billion of earnings.
It's freaking hard.
Now again, that doesn't mean you can't make a lot of money between then and the steady state.
If they go out and it's growing 50% a year.
But again, I would say there's too much money chasing too few things.
But again, AI is going to create a bunch of great new companies.
So again, and these guys probably will go find, if anybody's going to be on the bandwagon to find the next giant company, the social media equivalent, in the next five years, it will probably be one of these funds.
And so I can see the argument as well.
Everyone says that you need to be big or boutique.
So do you agree that you die in the middle?
I don't think so.
I wouldn't bet against people like Benchmark or Index at all.
I think you can stay nimble.
Those funds will invest earlier and they probably won't.
Obviously, their percentage ownership along the way will just get diluted over time.
But if anybody's going to find the next, I would give Index or benchmark just as much probability to find the next open AI or anthropic as Thrive or anybody else.
You seem very focused on praising index, which I love.
No, no, no.
I love Danny and Fran.
What specifically about index has impressed you so much?
I just think like watching, just looking at the returns, like it's just the returns and the funds.
Like it's math.
Like look at their DPIs.
They are amazing investors.
And like, there's a lot of people that get lucky. like one or two funds.
But if you can do this over like a 20, 30 year period and consistently put up like world-class returns, you're doing something like very unique.
Does king making exist?
King making is when you get Sequoia and Andreessen and then Benchmark and then that that that, that.
Yeah.
And the names are so good and the money is so much that you make the winner in the market.
No one else wants to go in, because that's the Sequoia funded company which then got iconic and then got
And got everything else.
But then, yeah, what you're seeing now is there's like so much money.
There'll be like multiple players in that space.
But I give the guys at Menlo a huge.
I give, like Matt Murphy he's a buddy of mine a huge amount of credit.
When they did Anthropic, it was not obvious.
Like it was highly, it was like, are you nuts?
Like, and look, I mean, he's right, so.
Totally agree.
Let's do a quick fire round, my friend.
What have you changed your mind on in the last 12 months?
That I think AI is even going to be bigger than we thought it would be.
Like it's going to change the world in like so many more areas that we're not even like thinking about.
What's the single most memorable first founder meeting you've had?
Nat Friedman.
Founder of Xamarin.
We whiteboarded how to save money with Starwood Hotel Points and Delta Airline Points.
He's just like a great, humble guy, like normal guy.
And now he runs, obviously, AI at Facebook.
You can invest in one seed firm, one Series A firm, and one growth firm.
Which do you choose?
A Series A fund would probably be Benchmark.
Growth fund would be myself because that's what I invest in.
I have a huge amount of respect for the guys at Iconic though.
We don't really compete against them because we're outside of Silicon Valley.
Seed fund.
I don't know.
On the seed fund stuff, it's like, oh, another one.
We don't have much experience with them, but I think the founder I mean the founder fund guys have like the returns are totally nuts.
So that would be another really good fund as well.
What's been the hardest decision you've made in your career?
Hardest decision has been to hire people that have the kind of same view on how to generate returns.
And so it's like, you're a cohesive group.
I think that's like just like the hardest, like you can, Because yours isn't the sexy way.
It's not the sexy way, correct.
And for young people.
That's The hardest decision is Actually the hardest decision was should we have in 2017 and 18 and 16 paid?
When everybody, when we were paying five to seven times revenues for software companies and Iconic, came in and started paying 10 times and just like winning the best deals and prices, we're like we know these are the best companies.
Should we do these deals?
We did not.
We were wrong.
What was the biggest miss and how did that change your mindset?
Oh, I mean, like, I mean, Procore, we were in it a tiny amount.
We did the deal with Bessemer, put a tiny amount of money in.
And, like, we were in a position to lead the next round that I connected.
And then two rounds later, we sold to them.
Now again, the decision to sell actually wasn't that big of a deal because it wasn't that big a position.
I mean, the stake was not actually invested.
Oh, I don't know.
We also got $2 million in the Shopify IPO because we knew the founders.
And that would have returned our second fund, like 2X, had we just not sold stock.
Like, didn't have to do anything.
What investor do you most respect who does not get spotlight?
Probably my partner, Nime, actually.
I just think he's like insanely disciplined.
His like, you know, like the like loss ratios.
I mean, maybe he lost, I don't think he's ever lost money.
Maybe he's lost money in one deal ever.
No, again, he's never had 10Xs or 20Xs either.
Probably my partner, Nime.
Final one.
What are you most excited for when you think about the next 10 years?
Actually, what I'm the most excited about is there's going to be a really bad downturn.
It's going to be.
You know it's different than 99 in 2000, but there's going to be a really big downturn.
And like markets just don't go up forever.
Economies just don't go up forever.
I think there's a lot of policies in the government and the world like right now that might end really bad.
And I think it's going to happen in the next 10 years.
That'll be the best time ever to invest, with combined like the productivity booms like that you're going to have with AI.
It's like You avoid the Gen 1 AI companies, just like if you had avoided the internet 10 companies.
And then think about all the internet companies that were started in like 03 to like 06.
And I think the same thing could happen with AI.
Which again, could benefit like a Thrive or a Andreessen who are raising these new giant funds.
And they could potentially invest it during those periods as well.
Always have money to play the game.
Correct.
If you don't have money, you're out of the game.
Dude, this has been such a pleasure.
Thank you so much.
Thanks for having me on.
