Insights from Coatue's Growth Investor Lucas Swisher

I think price does matter but I think it matters least. Margin matters but early

matters least. Margin matters but early it can be a misleading indicator. Data

is a prerequisite. It is not the answer.

Now I am bored. I am bored of recycled guests interviews that have been done over and over again. Today's guest is rarely ever on a podcast. Lucas Swisser.

He co-leads the growth fund at CO2 and they've backed some of the best companies of the last few years.

>> One of the places where we don't spend time. These pre-revenue companies are

time. These pre-revenue companies are really high valuations. I don't think the kingm concept is a real thing. You

don't >> who's going to want to help you and who's going to want to hurt you because that ultimately matters.

>> Ready to go.

Lucas, dude, it is so good to have you on the show. We've walked around High Park. I feel like we bonded in my short

Park. I feel like we bonded in my short shorts. I've heard so many things now

shorts. I've heard so many things now cuz I stalled the [ __ ] out of you from David and specifically Jesse at Dacagon.

So, thank you for doing this, man.

>> Of course. Thanks for having me.

>> We're going to dive right in with super easy question, which is public SAS companies are getting killed. I'm

looking at my book, dude, and I'm like, I thought I was so good at this and now I'm really starting to question it with the amount of red that I'm seeing. So,

why is the public private boundary breaking down and what's the better side to be on? For the first time ever with this AI wave, people are questioning the terminal value of SAS, right? These were

supposed to be like insurance companies, you know, annuity streams that just have revenue streams and profit pools forever and ever and ever. And for the first time with a lot of AI and I think in particular in the last 6 months with a

lot of the coding models that have come out of Anthropic, OpenAI and others, you are starting to question that value. And

when you question that value, a lot of other things happen, right? the breaks

that you got on SBC, stockbased comp, and GAP versus non-GAAP earnings, those all start to go away. So, that's the first dynamic. And then I think the

first dynamic. And then I think the second dynamic that's happening um is people don't know which SAS is going to be affected, right? Like you can think of a bullcase and a bare case for basically every SAS company in the

public markets. And when that happens,

public markets. And when that happens, people are saying, "Okay, I'm just going to take my bags and I'm going to walk away and I'm going to do something else, right? because why own anything if I'm

right? because why own anything if I'm really not sure which one of these things is going to work? I'm just going to go own consumer internet or Sims or something else, right? And so I think like that's the real dynamic that's

happening is those two things are happening all at once and all of a sudden, you know, that barrier breaks down. How do we determine the babies

down. How do we determine the babies that are being thrown out with the bath water, so to speak? There are many different profiles of companies that have all been hit relatively to the same extent, but they're very different profiles

>> for sure. How do we determine value in this pool of reductive market caps?

>> I think it's really really hard right now is the short answer, right? This is

the debate that we have all the time inside of our building, right? Which is,

you know, you take uh a design tool for example. You can make an argument that

example. You can make an argument that that design tool is super well positioned in a world of AI because they're going to integrate AI into all the design process and generate so much more value than before. But then you

could say, well, I just create all my designs in chatbt now, right? So, why

would I even need this design tool? And

I think that's the argument that you're going to have on both sides of this at all times. I think the things that

all times. I think the things that you're going to want to look for, the leading indicators that you're going to want to look for are is the revenue still continuing to grow sequentially?

Is net new AR still continuing to climb?

What's happening with the retention dynamics of these businesses? And I

think like the more you can see that, the more the better you're going to feel. But the reality is for the next 3

feel. But the reality is for the next 3 months, 6 months, 9 months, we're not really going to know what's really happening in the world, right? Because

things are happening so fast and all of the earnings that happen are retroactive, right? So you can only see

retroactive, right? So you can only see into the past that way. So I think that's why you're seeing people basically walk away from the sector. If

our job is to make money, which is pretty simple actually, I think we've overromanticized a lot of this job in the last years.

>> Correct.

>> Our job is to make money for our investors. Correct.

investors. Correct.

>> And we're both fortunate. Most of our investors are amazing institutions. So

my question is though opportunity cost adjusted now surely it has to be better being in the public where Monday is trading at 1 and a halfx WIX is trading at 2 and a halfx it's 4.5 billion market

cap at 2 billion >> surely that is better risk adjusted than the I'm not picking on any companies but the like10 billion rounds that we're

seeing for private companies. Yeah, I

mean I think you could make the argument both ways, right? On the public side, one, things may look cheap, but things may look cheap for a reason, right? When

things look really cheap, often times they look really cheap for a reason. On

the private side, often times the most expensive deals can be the best ones in many ways. And what I would say more on

many ways. And what I would say more on a macro point is if you think about the public markets right now, it's very hard to own the future, right? You have to like look and really pick and be really careful about the future. You get

liquidity, right? You can trade in and out of things. That's the beautiful part about the public markets. But it's hard to own the future. If you want to own the future, you kind of have to be in the privates, right? Think about it this

way. Say, I want to be ultra levered

way. Say, I want to be ultra levered long to the token factory. You know, I I think tokens are the next big thing in AI and I want to be ultra levered long to AI and whatever the next token

factory is. You can own some things in

factory is. You can own some things in the public markets, but you may say, "I want to own OpenAI in Anthropic and SpaceX, which now owns XAI, right? And

this long list of incredible AI application companies that are coming downstream." And so to get growth,

downstream." And so to get growth, something that's growing more than 30%.

To get durability of that growth, to get access to the future, you have to own privates.

>> So funny. I was asked the other day, what are the top three stocks that you're most like to own? And I said, that's easy. It's anthropic. It's

that's easy. It's anthropic. It's

revolution. and it's open evidence. Um,

and really interesting they like fantastic. You cannot get any of those

fantastic. You cannot get any of those in the public markets.

>> Correct.

>> And I thought that was just a really interesting realization of huh it's absolutely right and a decade ago I probably could have got them all in the public markets at this point actually.

>> You know that's absolutely right. Right.

We've seen the emergence of I mean we call them platform companies right at the top call it 20 rough just as 20 companies in the private markets.

18 of those would probably be public today a decade ago. But we've seen the emergence of these platform companies.

They're growing f they're huge scale growing way faster than what anything basically anything you can access in the public markets. They have multiple

public markets. They have multiple products. They've shown they can be

products. They've shown they can be great public companies but they're choosing to stay private. And those

platform companies you cannot get access to as a public market investor. As a

normal person you can't buy stock in Open or Revolute or Open Evidence all code two portfolio companies, right? um

you can't you can't get access to those and one I think that's a shame uh for the kind of normal person that they can't go and buy that stock but two it is it is an enduring trend that we've

seen over the last 5 to 10 years >> it's a shame but it's the greatest gift of venture capital that we could have ever wished for cuz it's allowed for us to transition from fidelities and the large previously public entities you

know working on BIPS to shifting to 2 and 20 and respectfully your CO2s and your GC's and light speeds of the world ballooning fund sizes our job to make incredible investments and generate real returns. That's what we are 100% focused

returns. That's what we are 100% focused on, generate real returns for our investors. And I think it's one of the

investors. And I think it's one of the benefits of having a somewhat flexible mandate, right, is I'm not tied to having to do a series B this year, right? If the if this trend emerges and

right? If the if this trend emerges and it continues to persist, some of the best trades for us, some of the best investments for us are in that segment of the market. I I'm going to move to flexible mandate later because I just

want to touch on the durability of revenue you described brilliant is like the insurance annuity that kind of previous software revenues were now we have you know this transiencece of technology superiority which sounds

really kind of wanky but like >> technology cycles just changed so fast so Gemini is better and then claude's better and then opening eyes better that your durability of revenue seems to be more questionable and transient than

ever should we ascribe value to revenue in the same way that we used to Yeah, I think I think you're absolutely right. I

think it's changing and I think it changes during every architecture shift, right? This is the really critical part

right? This is the really critical part of technology, right? As you moved from on premise technology to SAS technology, as you moved from the internet to mobile internet, right? You had a potential for

internet, right? You had a potential for all of the companies in the prior generation to completely evaporate. And

the big question is, can you find the companies that have the talent density, that are the most forward thinking, that are willing to reinvent themselves over and over and over again, which is so hard, and those are the companies that

you want to find. I I think of a great example every time I I think of this point, which is data bricks, right? If

you talk to Ali from Data Bricks, um we've been an investor since 2019. I

think one of the things that we've seen from there and even before, I mean, I looked at the company when I was at Kleiner Perkins. um I've seen this

Kleiner Perkins. um I've seen this company for a very long time is his ability to reinvent that company over and over and over again and ride

multiple scurves from being you know basically an ELT data transformation layer to you know running in training models to being the center of all data

in the enterprise. Those are like multiple S-curves that he's hopped and multiple times he's reinvented the company. And I think it's not revenue

company. And I think it's not revenue growth that you want to chase. It's that

it is the most incredible adoption of new trends and moving with the next chapter that I think we've ever seen actually cuz you could look at like a replet and go similar actually how they've co-attached to a new cycle. I

mean this is another leak. You mentioned

the growth of revenue there. This is the other hard thing which is like when we did lovables a it was like at 3 million in revenue. By the time the legals were

in revenue. By the time the legals were done it was at 20.

>> Mhm.

>> And so the multiple had gone from 70x to 10x.

>> Correct. I mean, Anton should have been asking for a trade like I I want to renegotiate this.

>> How do we value assets that are growing in such disproportionate or previously unseen ways?

>> Yeah. Again, I think it's this is one of the this is one of the hardest things.

It's why we actually think the the framework that we use internally is we think about valuation. Everybody has to think about valuation. But when a company is growing exponentially, 10x year on year, 50x year on year, right?

the things that we're seeing now, we think about valuation last. It's the

last question we try to answer. Is is

the valuation great? Because like you mentioned, you may invest in a series C at 20 million of ARR at 3 billion post and that seems insane. But if the 20

goes to a 200 in one year and then 600 the next and 3 billion the next, all of a sudden that looks extremely cheap. And

so our job is how do you find the things that are on that curve? Okay, let's take that. Actually, that's an interesting

that. Actually, that's an interesting one. Let's say you are investing in a

one. Let's say you are investing in a company that is doing, I don't know, 50 million in revenue and you're paying, I don't know, 4.5 billion.

>> Um, specific numbers >> and they say we're going to be at 250 million >> and you go at the end of the year, you're like, wow, gosh, you're going to 5x in a year and then we're going to 3x

the next year to 750 million. Wow. Well,

you paid 4 and a half. M

>> so even if it doubles or triples and then doubles again you're still not at the 6 or 7x that it will be valued at in a public market how do you just get your head around the hard dynamics of what it

will be in a public market >> yeah no I think this is I think it's a great question and it it filters down into every decision that we think about all the time right and I think the key

is first you want to be in gigantic TAMs big ideas only right because if you ever compromise on that very first principle and you're paying high valuations, you're in trouble. Medium TAM, small

TAM, you better believe that this thing can be absolutely gigantic. We have this test internally, right? Where it used to be 5 years ago, we called it the $10 billion public company test, right? Can

this be a $10 billion plus public company?

>> That bar has changed, >> right? In this in this new world because

>> right? In this in this new world because we are tackling much larger markets than we used to. And so now that test is can you be just an enduring public company?

And that may mean 50 billion of market cap. It may mean a 100red billion of

cap. It may mean a 100red billion of market cap. It really depends based on

market cap. It really depends based on the stage. But really it's big idea

the stage. But really it's big idea first and then is the market absolutely yanking you into that giant market.

Right? Do you feel that market pull such that that revenue curve and subsequently down the line that earnings path is really achievable? And so what you need

really achievable? And so what you need to really believe is like take this 50 million AR 5 billion post type company, right? You need to believe that someday

right? You need to believe that someday you can get to 5 billion of revenue with 30% margin minimum growing really fast.

So what does that mean? I better believe there's 50 billion of revenue to go get.

Sure. And you also then are saying that risk adjusted that is the best place you believe to put your capital which is where I get stuck. I'm like in an ecosystem where there's so much opportunity. I understand that you can

opportunity. I understand that you can get there, but is that really the best place to put my money over the 10 other homes where I don't have to double, triple, and then do a somersault into Kenya?

>> Yeah, that's really No, it's really fair. And again, it's it's something we

fair. And again, it's it's something we think about a lot. I think the the two things you want to consider when it comes to that, right? And it's one of the reasons why again, we love having a

flexible mandate. we are not tied to

flexible mandate. we are not tied to just being able to do a series B at 300 post and like that's all we can do is because we can have almost this like

rowboat that rows up and down the river and anytime we see something opportunistically that we think is the best riskadjusted opportunity at that moment we can invest and then the second

thing we're really looking for right take that round as an example and one of the reasons why we go back to this big idea test is I want to believe that if that company works that its best days

are ahead of it and I can continue to invest. One thing that um Jeff Horing

invest. One thing that um Jeff Horing from from inside always says is that you know the the best round is the double down round. And so by getting access to

down round. And so by getting access to that company at a certain stage if I think it has a shot at being a hundred billion dollar company that round may not actually be the best round but it

gives me the opportunity to double down and make an even larger investment where more of my capital is going to be deployed over long periods of time. And

again, it's important why this market structure is changing, right? I now

because companies are staying private longer. These platform companies are

longer. These platform companies are staying private longer. You have the opportunity to make those bets.

Previously, you might not have, but now we have the opportunity to make those kinds of bets.

>> It's so interesting you said there about the lesson from Jeff Horing about the value of the double down round being such a good place for like value accretion or like uh resource deployment in some ways. I always remember Brian

Seaman say we drastically underestimate the ease of the next double. And it's

like it's much easier for Harvey to go from six to 12 billion than it is a company to go from zero to six billion.

>> That's really freaking hard.

>> Yeah.

>> And I I really always remember that actually and it impacts a lot of how I think about selling.

>> Yeah. There's actually a stat around this that I love. We have this chart internally um which just shows at each market cap band the percentage of companies that 10x.

And the counterintuitive thing is as you go up those bands the percentage increases. So from a10 to hundred

increases. So from a10 to hundred billion valuation I have a better shot at picking a 10x not like a better return a 10x than I did in the prior band.

>> I just again I want to go back to the the fascinating statement that you said there like number one is market size. We

need gigantic markets. Do we need gigantic markets over the best immediately incredible founders? I know

that's a really shitty question to ask and forgive me for it, but I've actually learned that a good founder in a [ __ ] great market almost trumps a great founder in an average market.

>> Yeah. No, I think the founder is incredibly important. Right. You go back

incredibly important. Right. You go back to the example of data bricks, right?

Most founders in that situation, they would have been handed well, not handed, they would have built an incredible company in that first wave, but maybe they wouldn't have found their way to wave two and three and four. And it's

again it's why we like this type of company that we call a platform company, right? Which is the has shown the

right? Which is the has shown the ability to skip TAMs to have multiple TAMs over time. And I think that founder is tied to the market, you know, is tied to that market dynamic. And they're

they're equally important, but market size is always first. A great founder in a small market with a wedge that is not easily able to expand, I think, will build an incredible business. But

without having that core market and that core trend, it's hard to get to 100 billion, right? Right? Like you could be

billion, right? Right? Like you could be in this niche area that's very hard to expand. It's really easy to get an act

expand. It's really easy to get an act one but hard to get the act two and the act three and the act four and to build that enduring company right you see it with SAS today. You have to have the act two and the act three and the act four

and those things that's why they go really in tandem because of the expansion of TAMs and outcome sizes. Can

you be thoroughly elastic on entry price even at the real growth stage or does price elasticity constrain significantly with increasing enterprise value?

>> Ultimately price always does matter, right? I think some folks will say price

right? I think some folks will say price doesn't matter.

>> I think price does matter but I think it matters least.

You of course could make the argument of oh Lucas, well you do it five, why not six or seven or eight or 9 or 10 billion? What if it was 20 billion? What

billion? What if it was 20 billion? What

if it was 30 billion? There does come a delineation point where you feel like the returns are going to erode such that you would pass on an opportunity. But

I'd say by and large if you're the one instigating these rounds and you're the one that's preempting these rounds, you can kind of help figure out what the right price is for a company at any given moment. And I do think you want to

given moment. And I do think you want to think about it last because again these generational companies, it's almost never too late for them, right? I agree

with that that we have a very kind of clear litmus test which will make us make many mistakes and which is why we should change it immediately. But it's

like when we think about our entry price is true. We think about our entry price.

is true. We think about our entry price.

Do we think that we are able to 3x that entry price within the next fundraising round? And so if the company says hey

round? And so if the company says hey we're going to be at we're going to go from 1 to 10 million by the end of this year and because of that we're going to be able to raise at 350. Great. Well

we're paying 70 for the A. I can totally see my 3x there. Or it's like, well, actually, we're only going from one to four because we're a slow enterprise sales cycle, but we're paying 150 for

this incredibly hot a one to four. I'm

not raising at 300 if that's the case.

>> Right.

>> [ __ ] I'm probably raising a flat round.

>> Correct. Maybe no. That's how we think about it. Do you have any internal

about it. Do you have any internal monikers or frameworks for like >> I think the more simplistic way that we think about it and again this is not a hard and fast rule and it's more

qualitative than anything is if I invest in this round at this price and the company executes do I want to put more at a higher price.

That's the litmus test. It's to say all right say I invest in a company at 5 billion and it does super well this year. Is this a big enough idea? Is this

year. Is this a big enough idea? Is this

generational enough? Is this

transformational enough? Is the founder amazing enough that if in six months they wake up and say they want to raise it 10 that I'm gonna want to do that?

>> I think it was Henry Allen Bogen that said once that he wants to invest as much money as possible as the company becomes more expensive which is one of those kind of counterintuitive statements. Do you want to kind of spray

statements. Do you want to kind of spray early? And spray is a derogatory term. I

early? And spray is a derogatory term. I

don't mean that rudely, but like constrain capital effectively and then double down very aggressively or do you want to aggressively get ownership and then focus on constraining as time goes on?

>> Yeah, we're we're much more the latter and I think there are two there are two dynamics around this. One is our view is there are very few companies that generate the disproportionate value in technology. Right? If you look at the

technology. Right? If you look at the private markets today, take the whole private market ecosystem, 20 companies gener have generated 80% of

the enterprise value. 20 companies 80% of the enterprise value of all the private companies that exist in the world. And four companies, right, have

world. And four companies, right, have generated 65% of the enterprise value.

Four companies. And so what really matters is being in those companies, those 20 platform companies that are generating the disproportionate amount of value. And then your next question is

of value. And then your next question is all right well how like this wonderful framework like we all would love to be in all of these platform companies but like how and the answer is from our view you can't do this spray prey at the

early stage or the early growth stage the reason why is you may be in the wrong horse or you may be in the wrong market and you may be investing your time wrong because there are very few companies we need to make very few investments even at the even at the

early growth stage or the growth stage we can't afford to be in the wrong horse >> I get you but actually we I'm not asking you about yours But we see a world of competitive

investing. Andre is in, you know,

investing. Andre is in, you know, competitors consistently. There are many

competitors consistently. There are many people who are in many companies where they directly compete. You can actually afford to be in the wrong horse today and still do the next horse. I think you

can, but it definitely makes your job harder. Yes. Right. I think um you want

harder. Yes. Right. I think um you want to you want to make your job easy as easy as possible and not put up the barriers in ways to being able to win to win a

new investment. But I agree with you at

new investment. But I agree with you at at scale when companies become these platform companies, right, which is our style of investing.

>> Often times it's almost like buying a pseudo public stock in many ways. As a

public market investor, I could own Google and Meta. as a private market investor at the very earliest stages or the early growth stage, should I be investing in like two series B's that

are exactly directly competitive? That

feels really counterintuitive, right?

You probably don't want to do that one just because you're making a bet that's directly directly competing. But at the growth stage, when you get these platform companies, maybe they didn't even start by being competitive, but

they grew into it over time. when

founders come to you and they're like, "I'm how dare you?" Like, it started off as a pillow company and now it's doing enterprise payments. I how how am I to

enterprise payments. I how how am I to know?

>> And listen, that's part of the game. And

um as a founder, I completely I completely empathize and understand that, right? I can understand how that

that, right? I can understand how that would be, you know, a really tricky situation. From our perspective, it's

situation. From our perspective, it's when you're investing in large markets, often times you are going to end up in assets that compete because they naturally expand TAMs. A great example of this is I think we were the only

private investor that was invested in Snowflake and Data Bricks when they were both private. They started off in

both private. They started off in completely different areas, right? Data

Bricks didn't have a data warehousing product and Snowflake didn't really do a lot of ELT. It was mostly built around the ecosystem. They grew together and

the ecosystem. They grew together and they we weren't invested when they were, you know, starting to compete because Snowflake went public a lot earlier. But

at the same time, that happens in big markets. It's so funny you said that you

markets. It's so funny you said that you the enterprise value I think 65% is done by four companies or created by four companies. I tweeted not too long ago

companies. I tweeted not too long ago that basically unless you're an anthropic open AI cursor lovable open evidence carvey you name your like you're irrelevant if you're not in them

in venture and naturally every irrelevant venture investor came out of the woodwork and said how dare you Harry uh I'm very irrelevant um I promise um

and it just made me laugh but I did understand the nuance of you don't actually have to be in them if your fund size is constrained if you've got a hund00 million seed fund and you have a

$3 billion outcome. It's still a great business.

>> I I do. So, and so I wanted to ask you when you think about mega funds, which we see more and more of, >> do you think they will be able to produce the venture like returns that we see with early stage funds given the

outcome sizes or actually we just have a different LP profile?

>> Yeah, I mean I think I would separate the two asset classes almost in some way, right? Venture and growth in many

way, right? Venture and growth in many ways, right? They've we've almost

ways, right? They've we've almost developed completely independently and separately. Obviously, there are firms

separately. Obviously, there are firms that do both. There are firms that do both very well. If I was a venture fund staring down the barrel of a $3 billion venture fund, I think that's a tough

putt. That's a tough battle to be a part

putt. That's a tough battle to be a part of.

>> What do you What do you mean by that? If

you're in one, >> I mean, if you are a venture fund that is staring down the barrel of having to deploy $3 billion, I think that is hard because again, at the early stage, it is

hard to capture disproportionate ownership in the few companies that actually generate all of that liquidity.

If you're a small a small venture fund, I think it's super possible in today's world. You don't actually have to be in

world. You don't actually have to be in you don't have to catch the seed of SpaceX. you'd really like to because

SpaceX. you'd really like to because those are the only the platform companies generate liquidity, but at the end of the day, like you can get by with not capturing all of the great outcomes.

If you have a $3 billion venture fund, the math is really hard, right? You have

to capture a lot of those. The growth

funds are growth funds are a little bit different math. But I think just go back

different math. But I think just go back to your question about, you know, can these can a $5 billion growth fund scale and work? The answer is yes. The reason

and work? The answer is yes. The reason

why is the market's changing in two different ways. change number one, these

different ways. change number one, these companies are staying private longer.

They're staying they're getting bigger while they're private. There are more opportunities to invest over time. So

now where 10 years ago, you couldn't put a billion dollars in a company. Now you

can invest a billion dollars in any given round. If I invest a billion

given round. If I invest a billion dollars and I 10x that billion dollars, that's a 2x on a $5 billion fund. Now I

need to be concentrated to make that happen, right? And I think again that's

happen, right? And I think again that's why we go back to our strategy. Few

investments, big checks. You have to have that type of discipline to make those fund sizes work. The spray and prey does not work. But you can you can absolutely make it work. And then I think the second dynamic that's

different is the outcomes are bigger now. The outcomes are bigger now than

now. The outcomes are bigger now than they used to be. In the SAS wave, I think it would have been really hard to make that fund size work because SAS you're constrained. The largest SAS

you're constrained. The largest SAS company in the world that's independent outside of Microsoft and the hyperscalers Salesforce right?

Salesforce, Workday, Service Now, those are like a couple hundred billion dollars of market cap, right? So, it's

going to be hard in that world. But in

an AI world, if we actually think that we're augmenting labor, if we think that we can address a lot of these really big markets, if you move from human inputs to tokens, then you're going to have much bigger

outcomes and the math works. Do you

think in a world of vertical SAS or sorry in a world of mega funds with $5 billion plus funds which are several now vertical SAS is no longer an investable category just because the outcome sizes

will not be enough to generate the mega outcomes needed. I mean I listen

outcomes needed. I mean I listen vertical SAS I think you could talk about it a lot of different ways constraint TAM AI risk all kinds of stuff they're still great businesses today people are people have made a lot

of money in vertical software over time think about insight right they've had incredible exits in vertical software over time multi-billion dollar exits in today's world if you have a big fund I don't think that's where you should be

focused I think you should be focused on the absolute mega outcomes the platform companies that are going to generate that disproportionate return and you're actually going to get liquidity out of.

>> Don't laugh. What is an attractive enough upside scenario to get you excited? You know, we always hear an

excited? You know, we always hear an early stage in my business. Oh, it needs to be a fund returner.

>> Sure.

>> What is attractive enough for you? Like

Revolute, I think, is a phenomenal company. I'd love to be ambassador at 75

company. I'd love to be ambassador at 75 billion. I'd love to be and I think

billion. I'd love to be and I think there's a clear pathway to 250 billion.

>> For sure.

>> Is that 3x enough to be exciting?

>> No. A 3x is not enough to be exciting.

And the math is really simple, right?

Say, say I'm a fund and I'm CO2 and I want to make a 3x net return for my investors, which I think is which I think is sort of the baseline for what people would say is like a top quartile

return and people get really excited about 3x net return for a fund. You

know, 25% net IR, something around those bands. I'm going to have some things

bands. I'm going to have some things where I swing and I miss. And say I have a 1x, I need a 5x on the other side of

that. Heaven forbid I have a loss rate.

that. Heaven forbid I have a loss rate.

I have a loss and I have a zero. I need

a six. We obviously really try to avoid those, right? If I have a two, I need a

those, right? If I have a two, I need a four. So for me, I need to see a a a

four. So for me, I need to see a a a steady case where you can get that 3x, but I really need to believe that if the company 3xes, I want to put more money in because it can 3x again. And I think

this is a really critical thing that a lot of folks end up missing over time is ultimately I need to imagine a case where after I've made my 3x somebody else thinks they can make their 3x

because otherwise one I'm not going to get those 6x pluses that I'm going to need in my fund but two the company's not going to exit. I have to imagine this is why the big idea have being in

big ideas really matters. Somebody's got

to sit on the other side of that stock.

I have to be able to walk down the hallway to the folks that operate on our public side and say, "Do you want to buy this stock? Do you want to buy this

this stock? Do you want to buy this stock more than all the other opportunities that you have?" And so every investment I make, that is the rigor and the framework that I use is someday is my public counterpart going

to want to own this stock over everything else in their book. Is or at least is there a chance with the extension of those private markets and the outcome sizes and your entry point as we said can be flexible, but you know

the 300 to 5 billion is very standard.

But I know it can go much higher. Given

that delay in private public market entry that we we've seen from private companies, you have the chance to sell a lot more than you used to. How do you think about taking advantage of

secondary markets pre-going public and doing great returns for your investors?

>> Yeah. Um it's it's certainly an option for liquidity now, right? A lot of folks, especially the early stage funds that have been in companies for a really long time, >> um, are taking advantage of this and I

think rightfully so. And again, I think it's why even if you're an early stage fund, you this is a great style of investing and it's the type of company that you want to be in because it's the only type of company that can get access

to liquidity whether it's private or public. When you have doubled down and

public. When you have doubled down and it has been a mistake, what did you not see that you wish you'd seen? And you

don't need to name the company, but >> yeah, of course, I think again it goes back to that very simple principle. It's

the big idea and the multiple products.

And it's why we're really focused on that and why I harp on it literally non-stop is we've just overestimated TAM and we've overestimated the ability for companies to launch multiple products

and expand into new TAMs. We're usually not getting things wrong on the basis of metrics or the team being good or it wasn't growing fast enough. It's really

that question and it's why we have applied and really raised the bar on the type of investing that we do is because of that right it's like where where we've gone wrong and the nice thing is we have a you know we tend to have a

very low loss ratio because of the style of investing that we do but where we've gone wrong it's that when we say raise the bar the challenge that I have with a lot of companies today is they're like good

enterprise companies okay um but they're they're kind of doubling and tripling at 10 20 million in revenue What happens to that generation of SAS companies from 2020 2021 that that are

good companies >> great companies >> but well respectfully they're not great companies they're good companies and in a prior cycle they would have been funded and they would been funded well

but now are you really going to jump out of bed for 10 million growing to 25 million the short answer is I don't know I don't know what's going to happen to those companies I don't know what the

terminal value is I don't know what exit pathways are right with private equity in the space that in the place that it's in with the public markets where it is.

All I know is I have a lot of conviction and I see a path in the style of investing that we do. I don't I don't know how to comment on the other part of the markets, right? There's this notion

that like the the triple triple triple double double double is dead and these companies suck and all this stuff. I

don't think that's true. There are great companies. You can drive real margin

companies. You can drive real margin from them. They make incredible

from them. They make incredible businesses. It's just not our strategy,

businesses. It's just not our strategy, right? And I think in today's world, the

right? And I think in today's world, the reality is in a SAS world, the triple triple double double double was a thing.

It was an incredible metric. These

businesses were incredibly repeatable, very comparable. Now we exist in a world

very comparable. Now we exist in a world where if you have a product that the market likes, it is going to absolutely yank you into that market, right? It's

not going to triple at the earliest stages. It is going to scream, right?

stages. It is going to scream, right?

And I think you re you really see that, right? Right. And so those are the

right? Right. And so those are the companies and again it's not like we think these companies are all bad and this and that. It's just our strategy is to find those and to work with those

companies because that's where we think the disproportionate returns come from and it's the companies that we have an advantage working with. You mentioned

the word margin there and I think why I think so many people feel really insecure as investors today is because there's so many prizes that are being fundamentally questioned whether it's growth rates or rule of 40s or you know I was always taught that margin

mattered. I walked with my mother around

mattered. I walked with my mother around London. I'm like Jules margin matters

London. I'm like Jules margin matters and now I'm looking at how you wake up every morning pretty much.

>> I put my feet on the ground I say margin matters. Um but I start to question

matters. Um but I start to question whether margin actually does matter in the early days. If your company is rocking, you're spending on inference and that is a sign of good usage and

love. Does margin matter?

love. Does margin matter?

>> Yeah, I think the same business principles that have applied to businesses for the last three decades in technology are the same business principles that matter today. Margin

matters, but that is nu but it's nuanced. Margin I would I would add an

nuanced. Margin I would I would add an addendum to that. Margin matters at scale. The best businesses in particular

scale. The best businesses in particular infrastructure whenever there's a technology wave happening and an architecture shift some of the best businesses not all of them but some of the best businesses have had horrific

margins early >> the hyperscalers the hyperscalers were low margin early those are the best software platform businesses in the world right snowflake and data bricks

very low margin early a lot of people passed on those early rounds because oh in SAS you have to have 80% gross margin look at snowflake it's got 20 you like margin matters but early it can be

a misleading indicator right especially when an architecture shift is happening the reason why in AI and I'll give you the the bullcase on this right is the reason why margin might not matter early

on in a company's life in AI is the cost curve is coming down so fast say my inference margin is 10% today it may have been negative a quarter ago and super negative two quarters ago but the

token costs are coming down so fast maybe I'll be if I'm an application AI company I'll probably be able to develop my own model for some of the workloads.

I'll probably want to use frontier frontier models for some of the workloads. I'll probably want to use

workloads. I'll probably want to use really small cheap models for some of the workloads. And over time, I'll be

the workloads. And over time, I'll be able to optimize my margin. That's what

we really believe is going to happen over time. But listen, these companies

over time. But listen, these companies are structurally lower margin than the last generation because you pay the cloud and you pay the LM. And so we just

get used to actually larger outcome sizes with larger probably revenue pools associated but a slightly lower margin profile. Well from I think gross margin.

profile. Well from I think gross margin.

Yes. But what you might say is hey I'm actually substituting gross a lower gross margin for lower opex because my engineering team maybe it's more efficient. My sales team is using AI

efficient. My sales team is using AI tools now. Maybe it's more efficient. My

tools now. Maybe it's more efficient. My

legal team maybe it's smaller and maybe I'm more efficient. So your terminal operating margin may actually be higher in this world than the last world. Your

gross margin might be lower, but your operating margin, which is ultimately at the end of the day is really what matters, may end up being higher.

>> What else do you think a lot of investors oscillate or focus on which is total [ __ ] You can pause.

>> What do other investors focus on that is total [ __ ] >> Yeah. Like I my f my favorite thing is

>> Yeah. Like I my f my favorite thing is vision. Oh, we love founders with great

vision. Oh, we love founders with great vision. And I'm like, you know what?

vision. And I'm like, you know what?

Most founders who start with something worth zero, if I say, I'll give you a billion dollars for your thing that's worth zero today, they'll go, oh, billion dollars. That's great. That's

billion dollars. That's great. That's

really great. Some of the best companies, Google tried to sell for the lowdigit millions.

>> You unlock the next chapter through progression and continuing. Yes.

>> I think vision is [ __ ] >> Yeah. I think I think you could say that

>> Yeah. I think I think you could say that one of the places where we don't spend time these are really going to work is these pre-revenue companies are really high valuations, right? I think this is

a lesson that at least we've taken about ourselves from 2021 is that is not our business. The pre-revenue company at a

business. The pre-revenue company at a really high valuation with no product is not our business. And I think a lot of investors are focused there right now because what ends up happening is if you

can't invest in OpenAI and Anthropic and Revolute and SpaceX and Canva and you know all of the companies that are these great platform companies and you're locked in to a certain part of the

ecosystem, you make decisions that you can make. And so I think a lot of people

can make. And so I think a lot of people are focused on that part of the ecosystem right now. And for us that doesn't make sense from a riskreward perspective. Our focus is real

perspective. Our focus is real businesses that are growing really fast that we think are going to be really durable outcomes and actually generate liquidity for our investors. And again,

it goes back to this principle around if I have a zero, I need a six. And a six is really, really hard. You mentioned

earlier that you wouldn't want to be a seed fund deploying three billion or staring down the gun of three billion or whatever it is. In a way I would because I can absolutely destroy the economics of all the seed fund players and it's

something that we see. We lost a deal recently to a large mega fund and we did three on 15 and they did 10 on 100 um with no lick pref u pre anything and they just destroyed all the economics

and I told the founders you should absolutely take that deal like and sell tomorrow for like 5 million bucks and you've made money.

>> Yeah.

>> But they can destroy the economics. Is

seed still a business when you have mega fund entry with different economics in the way that we do?

>> I mean, I think it's gotten harder for two reasons. One is you do have this

two reasons. One is you do have this megapy dynamic, but the other thing is we're in a different world than we were 5 years ago, right? Which is

in general people are coming out of the gate with bigger check sizes and bigger valuations, right? And that just raises

valuations, right? And that just raises the risk like dramatically over time, right? So I think that's those are the

right? So I think that's those are the two dynamics that are that are really at play is it's harder for a seed fund to buy 20% today or 10% today or 5% today than it was a few years ago because of

this dynamic and that has to do with a lot of different things. One of them is in a SAS world, you didn't need that much capital. You start it up, you kind

much capital. You start it up, you kind of get going, whatever. In this world, businesses tend to be more capital intensive, right? They may be actually

intensive, right? They may be actually more durable at scale because of this.

Makes it harder for the next entrant to come in. But the reality is they're

come in. But the reality is they're harder to start. They take more capital and that has led to some of these like very big ballooning seed rounds. I think

that makes it harder to be a seed investor in today's world. And again,

why having a flexible mandate where you can row up and down that river and not have to be there is really a nice place to be. Do you think a good investor at A

to be. Do you think a good investor at A can be a good investor at D? A lot of LP mindsets are like, no, early stage is different to growth and that's very different. I think Josh, who's a dear

different. I think Josh, who's a dear friend at Thrive, has has proved that actually that's not the case. But other

people still very much hold that true. I

don't think it's impossible, but I do think it is very hard. And I think that's because the type of frameworks that you use, the types of things that you see are very different at different

scales. Being able to read a balance

scales. Being able to read a balance sheet actually does matter for a preIPO company, right? Like that really

company, right? Like that really matters. But seeing thousands of

matters. But seeing thousands of founders, thousands and thousands and thousands really matters for seed because what else do you have, you know, to go off of? And so I do think it really matters. I don't think it's

really matters. I don't think it's impossible. I think there are some funds

impossible. I think there are some funds that have done it exceptionally well, but I think it's why you see for us, right, we um we as a fund, we I actually think the public market skill set and

the private market skill set is also different. And so having different folks

different. And so having different folks that are focused on different things is really important because there are different parameters, different things that you see all day. And there are other people that you're competing with

in all of those different segments that make it really tough to be the best at everything. there seems to be a

everything. there seems to be a consensus of excitement around certain companies and we see the concentration of cash to to few players in select industries which has led to this idea of kingmaking.

>> Um when we think about kingmaking do you think that is a rational or real thing or do you not?

>> I don't think it's a real thing.

>> You don't I don't think the king the kingm concept is a real thing. I think

companies um some companies attract more capital early, some companies slingshot from behind, right? Having had somewhat less capital.

>> You raise a lot of money from large tier ones who then are very vocal and loud.

It dissuades other people from investing in anyone else.

>> It certainly does and it's an advantage, but it doesn't mean that you can't build a great business if just because a bunch of tier ones are crowding into a name. I

think there is the concept of it gives you an advantage. More capital does give you an advantage. There are some cases where historically it's given you a disadvantage, right? Like if you have so

disadvantage, right? Like if you have so much capital and not a lot of product market fit, I'd say you probably had a disadvantage. If you have a lot of

disadvantage. If you have a lot of capital and insane product market fit that allows you to go hire a huge salesforce, that's a huge advantage, right? Like if

you're taking if you're actively taking a market and you have way more capital, a better, right? Like it's this is like almost tautological, right? It's like

that is a huge advantage. But do I think that there's this concept of well if Kotu and Sequoia Inciner all pile into a company that it's over? No. I think it is an advantage but I don't think it

makes it which is probably where kingmaking goes too far. Do you think we are for growing companies today in the same way we have done before?

>> What do you mean by that?

>> You know >> yeah you know they shove a tube down it and then force feed it and then it explodes. Yeah. So we are putting too

explodes. Yeah. So we are putting too much money into companies and then then they are artificially inflating and then exploding. I think there are segments of

exploding. I think there are segments of the market where it feels like that is that feels like a little bit of a problem. I think for these companies and

problem. I think for these companies and I and I'll just focus on what we do right for the companies that are explosively growing at the growth stage and have real product market fit, real

product, real traction. I don't think so. Right? You look at these companies

so. Right? You look at these companies that raise really rapid rounds in succession at the growth stage that actually have something underneath. No,

because these cap there's real ROIC on the capital that's being invested, right? There's real ROI for the dollars

right? There's real ROI for the dollars that are going into these businesses.

Sometimes I think when growth funds in particular chase venture companies, right? We've talked about that

right? We've talked about that delineation point. That's where I think

delineation point. That's where I think it can get quite dangerous. It can make companies complacent. Um, it can make

companies complacent. Um, it can make companies spend too much on things that maybe that maybe it's not great. like at

that early stage that kind of capital scarcity I think can breed actually great things um and so I think there are parts of the market where that's certainly true these growth stage companies with this insane momentum I

don't think so do you worry that there are a generation of companies Ala Canva Ala stripe which do not need to go public great businesses great businesses in private markets ample liquidity for

those that want it very active secondary markets if they need to why would we go public as John said I don't want some [ __ ] 30-year-old analyst Is it some big bank telling me that I should increase sales?

>> Yeah. I mean, I think this is one of the reasons why companies have stayed private longer. I don't think most of

private longer. I don't think most of those platform companies will stay private forever. I think there are a

private forever. I think there are a couple reasons that that are good to go public today. One is real capital at

public today. One is real capital at scale, right? Real capital at scale.

scale, right? Real capital at scale.

Still, say you're a trillion dollar plus company. It's available. But true

company. It's available. But true

liquidity that's not layers and layers and layers of SPVS and all this tricky [ __ ] and like managing your cap table like true liquidity tweeting about your layered SPVS. >> I mean you've seen some of the things

around some of these companies where it's like unbelievable like the opacity of this and the companies don't want that either.

>> They want to know who their investors are and you get the investors that you deserve as as the as these as you know you scale and you go public. So

liquidity at scale is is certainly one reason. The second reason is and this

reason. The second reason is and this can cut this second reason I think really does cut both ways but the public markets are an incredible feedback mechanism for businesses right if you think about Netflix during their

transition right like the public markets were some of the first folks like the analysts and the public teams to really speak about that transition from the disc to streaming right from the CD to

streaming and I think especially in an AI world the public markets folks in the public markets are really really smart the 25-year-old analysts this and that right like everybody's going have varying degrees of intelligence or

opinion, but the public markets are this like incredible weighing machine that can give founders amazing and teams amazing feedback on their businesses.

And then the third thing is when you go public, it's sort of harder to touch you in some ways. It's easier to touch you from a buying and selling stock, but you're now a public company. You're now

levered to 401ks, to indices. When

you're a private company, people can mess with you a little bit more. It just

is what it is. They can mess with you.

When you're a public company and you are a big important public company is harder to mess with businesses and so you kind of have this rigor around you. I adore

Cliff and and Mel and I think they're amazing. But you said about like the

amazing. But you said about like the platform companies and you included Canva. If you were to be a harsh critic

Canva. If you were to be a harsh critic and you say, "Well, Figma is worth 11 billion today and image generation, graphic generation is right in the

pathway of a lot of large AI companies.

Is Canva really a platform company?"

What I love about Canva is they've shown that same ability that data bricks has where they're able to hop multiple Surves and develop multiple products.

Right? They started as I I'm sure you know the story, but it's incredible. Mel

started Mel and K and Cliff started this business as a yearbook business making yearbooks. They successfully

yearbooks. They successfully transitioned that online. They

successfully trans transitioned that to SAS and now they've transitioned to many many many products. Right? Canvas is a suite of like a dozen products that are all growing extraordinarily quickly. So

you have that dynamic and then the other thing that I love is they were one of the first companies that really leaned into AI. I remember Cliff called me

into AI. I remember Cliff called me about this very early on because we were early investors in uh in stable diffusion if you remember the image the image generation company in OpenAI and a

few of these other businesses and he called us really early in this wave like pre- chatbt in this wave and was like hey we're going to start integrating AI into our business now and so that type

of mentality both the ability to develop multiple products and hop Tams and to stay ahead of the curve in AI I think is going to serve them very well. I again I love Cliff and I love Mel and I totally agree with you in terms of that

expansion. You know what I also love

expansion. You know what I also love about that story? Married couple amazing Australia non-technical yearbooks like to be fair the seed investors of that in I'm not taking

anything away from Malen Cliff again. I

think they're exceptional but you've got to be quite mentally plastic away from the traditional investing rules to be like yep all in.

>> Credit to those folks. Um, and I mean, credit to the growth investors who took a leap on that one a little early, too, right? It was very non-obvious. It's I

right? It was very non-obvious. It's I

mean, I I worked for Mary Mer when I was at at Kleiner Perkins, and she was one of the folks that took a leap on Canva.

>> What's your biggest lesson from working with Mary?

>> I mean, so many lessons. I think the biggest lesson is she has this and it it comes from her background of being at Morgan Stanley for a really long time.

She has this incredible analytical bent of being able to see things and see stories and numbers that other folks don't and being willing to lean against the grain whenever she feels things. Um,

and she's able to tell and tell these incredible stories with data and understand what's happening in the world based on data. I'll give you one example is I remember my second week at Kleiner.

Um, I didn't know how to model. I came

from in I came from insight. I could bar I could barely model. I was great at talking to founders but could barely model. And I found myself, you know, in

model. And I found myself, you know, in the middle of a modeling exercise with Mary and just getting absolutely destroyed. And one of the things she

destroyed. And one of the things she taught me is like that is actually really important. Being able to express

really important. Being able to express a company in a few a complex company in a few lines in Excel and tell stories with data is like an incredible skill.

And she has this knack of being able to look at like sell in 95 and know there's an error. And so that's what I learned

an error. And so that's what I learned is to be like highly analytical, very detail- oriented, and to tell the story with the data.

>> To what extent does that truly matter versus phenomenal founder, big market growing fast?

>> I the way that I phrase data, and I phrase this to our team a lot, and this is what I really believe is data is a prerequisite. It is not the answer. The

prerequisite. It is not the answer. The

data must be very good, but it's not the it's not the whole picture. And I

remember um I I was sitting in a very old IC and we were when we were looking at data bricks at CO2 way back when um and Thomas was like Lucas you're missing the force through the trees here like

just because net new AR didn't accelerate dramatically in any given quarter does not mean this trend is not happening and so net new ARR or whatever metric you want to use they're

incredible guideposts but you can't miss the for you can't miss the forest through the trees in this like the bigger picture it really matters but it is it is helpful, right? I I'd say like the thing that I'm looking at the most

with a lot of these um kind of AI native businesses is if you're low margin, I need you to have high retention. You

have to have it because if you you leave no margin for error if that's not true, right? I need if you're be a low margin

right? I need if you're be a low margin business to start, the customer behavior must be so sticky. It's got to be so sticky because otherwise you're really really fragile. One move the wrong way

really fragile. One move the wrong way and you have no margin for error, right?

So like those are the types of places where data can help you. It can hurt you if you live in Excel all day and you are like just missing the forest through the trees.

>> Totally agree with that. You worked with Mimoon too.

>> Yes.

>> I I really love Mimoon.

>> Me too.

>> What was your biggest lesson from working with Mimoon?

>> Again so many. I think the thing that the gift that hasn't I think from the SAS era my view is he was the best series A investor in the SAS era period.

Right. Right. I mean, if you look at his track record, it's incredible. Figma,

Glean, Ripling, Slack. I mean, it's just this unbelievable like hit after hit after hit. What Mimoon is special at and

after hit. What Mimoon is special at and what he pays attention to and what I learned from him is there are distinct inflection points in companies. There

are moments where they really kink, right? They kink up. And he is the

right? They kink up. And he is the master at seeing that around the series A, right? With very little data, being

A, right? With very little data, being able to see it. I remember we going back to um I worked on uh Figma with him when I was an associate at Kleiner and I cut all the data for Moon. This is a it was

it was a very fun time and I remember he took one look at it and within 30 seconds he was like we're doing it and there was this big company in vision at the time and it was a great company and everybody thought it was the winner and he looked at that data and he was like

this is this is going to happen and what he saw is the net retention curves the customer behavior of really big companies I think I can't remember exactly but I think the companies were

Google and Square and Amazon right like really insane customers and this is when Figma had 500k of AR and he saw saw the usage curves inside those three companies. He's like, "We're at an

companies. He's like, "We're at an inflection point. We're doing this." And

inflection point. We're doing this." And

that's what he's amazing at.

>> I'm not surprised. And time and time again, I'm amazed by the insight. Again,

I meet so many investors and I actually find not that many have the insight that Mimoon has, that Neil Ma has, that Pat Grady have. Super unfair question. You

Grady have. Super unfair question. You

super unfair question. You can invest in Mary Maker's fund, the solo GPS. Mary

Mik's fund, Nam Moon's fund, or Jeff Horing's fund. Whoa.

Horing's fund. Whoa.

I want dollars. Absolute dollar return.

Absolute dollar return. I think you got to split it in some way, right? I think

what you're looking for if you're none of them pay you anymore.

>> Yeah, I know. I know. I know.

>> But if you're looking if you're if you're an LP, what you're looking for is the best return across different strategies. I think it's going to depend

strategies. I think it's going to depend on what on what you're looking for, what your time resonance is. Let me give you the benefits, right? Moon, I think, is going to have an incredibly high slugging average, really amazing

returns, but it's going to be more risk.

Mary, I think you're going to get like this incredible growth portfolio of blue chip names. And then Horing is going to

chip names. And then Horing is going to provide you very strong stable core returns, right? And I think like it

returns, right? And I think like it really depends on what you're what you're looking for, right? And LPS want different things and they probably want exposure to all three in different ways.

Let me ask you another one because you failed at that one. Okay. You've got Pat Grady at Sequoia. You've got David George. And then you've got the folks at

George. And then you've got the folks at Founders Fund, the Napoleons and the behind the scenes people at Founders Fund. You can only invest in one fund.

Fund. You can only invest in one fund.

>> Oh, you can't do this to me. You can't

do this to me. I'm going to let you out of the room.

>> No, it's incredible. Um, I think Founders Fund's strategy of being ultra concentrated in a few companies has just been this incredible strategy over time

and I think Pat Grady's ability to pick series B's is like pretty unmatched pick and win series B's. He's very very good and I think Sequoia is very good at that. So I think again they're they're

that. So I think again they're they're they're good for different reasons but it again it really depends on what you like. Final one before we do a quick

like. Final one before we do a quick fire. You have one final dollar and you

fire. You have one final dollar and you can put it in Open AI or Anthropic.

Which one would you put it in? Right.

I'll talk about the merits of both. Open

AI, incredible consumer franchise, right? Just incredible consumer

right? Just incredible consumer franchise. The retention curves, the

franchise. The retention curves, the growth, all of this stuff, what they've done, it's just it it's insane the innovation that's coming out of that business. on the consumer side, their

business. on the consumer side, their strength that's emerging in enterprise with codeex and and other coding use cases in these big transformational enterprise deals and like a third unknown unknown vector. They have this

like almost unknown unknown about it because they acquired Johnny Ice company, right? Who knows what that

company, right? Who knows what that could look like in 5 to 10 years. They

have this like SpaceX, you know, it's like how do you value space? Well, how

do you value AI, right? It's like this unknown unknown element of just how big could it get? I think that's the that's the bull case. Did you see the design work that Johnny Ives team did for Ferrari?

Oh my god, I can't drive. I don't have a license. I want a [ __ ] car like this

license. I want a [ __ ] car like this because of Johnny's design. I was like, >> you're going to have to learn.

>> You're going to have to go get a >> No, I ain't got a license. It'll be a present.

>> But I was like, >> you can ride shotgun.

>> Exactly. I'm very happy to hold the phone with the maps.

>> There you go.

>> But I was like, "Wow, I've never wanted a car as much as Johnny's design."

>> Yeah, it's amazing.

>> Yeah, >> it's incredible. And I think like that's the bullcase. The bulk on anthropic is

the bullcase. The bulk on anthropic is really simple and really straightforward. Their focus on coding

straightforward. Their focus on coding has been an unbelievable advantage for them because coding is the first use case in AI that's really taken off. That

code that coding focus has led them to have a beach head in all the other analytical tasks in the enterprise, right? Everything is code, right? Like

right? Everything is code, right? Like

everything in the digital world is code.

And by having a great coding model, they've been able to do that. And the

last strategic decision that they made that I think is really sort of unappreciated by the market is they built for every cloud and they built for every chip platform and that gives them

incredible optionality and a lot of people want them to win and so that is like a real advantage. So they all >> is that I'm sorry I'm really naive here and I'm not asking for like who's better or who's worse. Is that different to the

other providers? It is right because

other providers? It is right because some of the other providers have been sort of at least until this point right like this is always changing but they from kind of from day one had

architected themselves to be able to be partners with every cloud and to be with tranium and TPUs and GPUs and that takes a lot of infrastructure investment but

it means in a capacity constrained world where the demand for compute out outstrips supply their ability to do that makes them more cost effective. It

gives them an advantage on where they can deploy. They can take capacity that

can deploy. They can take capacity that other people can't. And that means like, hey, in this world that's an advantage.

>> I totally get you. And actually having more people support you is a very very advantageous position.

>> Yeah. It's one of the things that we actually we always try to think about is like and it's a a question that Philipe asks all the time is like who's going to want to help you and who's going to want to hurt you because that ultimately

matters, right? Like

matters, right? Like having a lot of people want to help you and benefit from your growth is a very nice position to be in.

>> Clearly Phipe agrees with kingmaking then.

>> Well, it certainly helps.

>> It totally helps. Listen, I I want to do a quick fire. So, I say a short statement, you give me your immediate thoughts. Does that sound okay?

thoughts. Does that sound okay?

>> Done.

>> What have you changed your mind on in the last 12 months?

>> The size of outcomes. This is really simple. like 12 months ago, I wasn't as

simple. like 12 months ago, I wasn't as convinced that we were really going to be able to address labor um and that this like token machine concept that, you know, human inputs were going to

become machine inputs. I wasn't all the way there. We were still kind of in an

way there. We were still kind of in an assistant world versus an agent world.

I've become fully convinced on this. A

lot of it is due to using a lot of the tools like Claude Code myself and just really feeling this. But that my opinion has really changed on that in the last year. I think the outcomes this

year. I think the outcomes this generation in technology are going to be so much bigger than the outcomes from the last generation.

>> When you think about that labor displacement, do you think we are overestimating the adoption of enterprise and labor displacement or actually underestimating it's coming sooner than we think?

>> This is the hardest question, right? And

it's like if you go back to the last era, people always overestimate or underestimate how long it takes to do things. And I think it's because they

things. And I think it's because they look at the consumer and they see how fast the consumer changes and adopts things and apply the same thing to enterprise. I don't think it's unlikely

enterprise. I don't think it's unlikely that we're going to wake up tomorrow and all these SAS companies have, you know, evaporated. Change takes time, right?

evaporated. Change takes time, right?

These things are going to take time.

That said, these things are happening much faster than they were before. If

you look at anthropic, right, publicly available numbers, 9 billion of AR growing 800%.

at the same scale the three hyperscalers on average when they were 9 billion of AR were growing 60%.

So it's happening faster than SAS did.

We know that it just is like it's in the data, right? That's that's the story.

data, right? That's that's the story.

But how long is it going to take for all of this to happen? I think it's going to take a long time, right? Because people

are slow. They're sticky. Change is

hard, right? It's not like I can just throw claw into an enterprise and all of a sudden it works. There's integration

work that has to be done. There's

deployment that has to be done. Like

this stuff is complex. One of the most [ __ ] ones is people talk about like in the agricultural revolution, the industrial revolution. And I'm like,

industrial revolution. And I'm like, yeah, you had to buy a [ __ ] tractor as a farm in France and then train your 75 people on a tractor that comes in a year's time and then you have to assemble it and then train them on

safety and document. Here it's like Gemini puts in Nano Banana Pro and you're good to go tomorrow.

>> Yeah, it is faster. It's certainly

faster.

>> So much faster. Um, what's the single me most memorable first founder meeting you've had? I'm not asking for the best

you've had? I'm not asking for the best fan, like the most memorable first found.

>> Winston from Harvey.

>> Why?

>> It's not even close. I think it was because one, I already believed when I when I came into the meeting. And then

two, the founder market fit in the story was so clear so early, right? Like what

are language models good at? Language.

Text in, text out. What is one of the most like textheavy professions? Law.

What have I seen early on? Document

generation, document analysis. and his

articulation of that thesis and that story, it was just like so spot on. I

met him before the series A that Pat did. Um, and I remember being like,

did. Um, and I remember being like, "This is it." Like, "This is the one."

>> Did you lose the A?

>> Um, we had an early stage practice at the time, um, that we were really involved with, and we did lose the A, >> which I think is, you know, it goes back

again to our to our and I don't try to do very many A's. It goes back to our strategy which is you know even sometimes if you miss an early round for the great companies in the world there's always another round.

>> Dude, we are doing a term sheet now for a company and we turn down the seed and we're doing the A. And I said to the team like I will not lose out on a great company because we are too egocentric and arrogant to accept our mistake.

>> Absolutely.

>> So we're not going to do it.

>> Ridiculous. No, I'm kidding. I just

fired the seed team. Yeah. Uh, you can invest in one seed firm and one series A firm.

>> I mean, you guys obviously for the seed.

Come on.

>> I love it. I I'll take that actually.

How about that?

>> Which series?

>> I would say Sequoia and Benchmark. I

want to split my dollar.

>> I'll take that.

>> You're going to allow me to split my dollar.

>> I'll take that. Rory O'Driscoll, who we do a show every Thursday, he's brilliant. He always says with

brilliant. He always says with Benchmark, you know, reports of my death have been greatly exaggerated. I just

find it so entertaining.

>> So, and I think it's this firm that >> portfolio is so good on this.

>> It's so good and they have the ability to reinvent themselves, right? I mean,

they hired EV, who's my old analyst, so good for them.

>> Listen, this is always the rough with the smooth. Poor Peter. He's got to deal

the smooth. Poor Peter. He's got to deal with that every day. No, I love that. I

think he's fantastic. But seriously, you look at like your firework, your Lora, your Madness. I mean, the list goes on.

your Madness. I mean, the list goes on.

>> Sierra, I mean, unbelievable portfolio from this era.

>> But again, everyone's like a benchmarker over like I don't I'd take any of those companies in my portfolio.

What's been the hardest decision you've made in your career?

>> Leaving Insight for Kleiner.

>> I know a lot of people. So, I I was Harvard undergrad, then went to Insight, and I left Insight pretty early. I was

the first one to leave. We we hired classes of 10 back then. So, it was like 10 analysts, all really young kids coming out of school. And um the junior the junior summer internship at Insight

was literally dialing for dollars. I

mean, it's it's incredible training ground. I called 50 CEOs a week. Like

ground. I called 50 CEOs a week. Like

literally cold call. I mean this was 10 years a you know almost 15 years ago now.

>> Don't laugh. What do you say? Hi it's

Lucas from >> Hi I'm 19 years old. I mean but it's it's amazing right because you have this platform where young people are empowered and they're able to grow within the organization and bring other

people in as they need and you learn how to like navigate a process at n you know 19 20 21 years old. It's this incredible training ground. But I was the fir I was

training ground. But I was the fir I was the first one at Insight to leave my class. And it was hard because it was

class. And it was hard because it was like it was basically like stepping off the linear path. Like most of my life had been like very linear decisions. Not

very hard to like take the SAT, do well, not very hard to accept Harvard and then not very hard to go to Insight even though it was a little abnormal at the time. Like it was a billion dollar fund

time. Like it was a billion dollar fund when I went. But I think like going from insight and leaving your comfortable class in basically, you know, private equity SAS and going to be the only

associate on the West Coast in a place you didn't know, that was like that was a a little bit of a leap. Um, and I mean that's my advice to all the all the young folks in their careers like you got to get off the linear path. You have

to like it's the only way. Get off the linear path.

>> It's so funny. I always say the safe path is so much less safe than you think. The risky path is actually less

think. The risky path is actually less risky than you think. Um, do you have to be in San Francisco if you want to build an amazing AI company?

>> No, but it helps. It's like the kingm.

It certainly helps. I think if you look at some of the advantages that you have being in San Francisco, right, just the incredible amount of talent density, there are not very many people in the world that know how to work with these systems right now. That's just the

reality. And many of them are stuck

reality. And many of them are stuck inside of two, three, four companies.

But the rest, most of them are in a very small radius in that in the Bay Area.

It's not impossible, but it's kind of like why would you make your life harder?

>> So, with that, do you think the 100 million to 500 million pay packets are actually justified?

>> Yes.

>> I think they should give them to podcasters, too. Just putting it out

podcasters, too. Just putting it out there.

>> You got this. I believe in you.

>> Thank you so much. There's very few people who know how to do this very difficult job. Uh, penultimate one.

difficult job. Uh, penultimate one.

What's the biggest miss that you reflect on most across your career?

>> Like mine is deal. It's not easy because, you know, if you've done this long enough, you have a lot of misses.

>> A lot.

>> I do remember very distinctly going and visiting Anderil for the billion-dollar round down in LA. And I was a SAS investor at the time. So why I was the one who went to visit Anderville, I

won't know. Um, but it was one of the it

won't know. Um, but it was one of the it was a classic case of um back then I think my perspective was slightly more myopic, right? I was mostly focused on

myopic, right? I was mostly focused on SAS, very focused on metrics. And if you looked at that P&L, there's no way, you know, you're a P&L investor, there's no way you invest. Just is what it is. It

was an ugly P&L. But it was an example of me missing the force through the trees. And um not seeing just how

trees. And um not seeing just how special the founding the founding team was there, just how important that trend was, where the world was going, right?

And that's an example of where, you know, Founders Fund got that right. A

lot of people got that right. We got

that wrong. Final one. What most excites you for the next 10 years?

>> Oh my god, I'm just I'm excited about the products. I think like this is one

the products. I think like this is one of the things that um it it it's ingrained in everyone that joins CO2 at the end of the day is we love technology, right? Like we're

technology only firm. We love

technology. We love these products. Um

and the ability to just like change our lives over the next decade and use so many new things I think is what has me most excited. I cannot wait for OpenAI's

most excited. I cannot wait for OpenAI's new device. Like we've it's going to be

new device. Like we've it's going to be one of the first exciting new devices in some time. Like those types of things I

some time. Like those types of things I think is what I'm the most excited about is the products. Like using cloud code this year. Oh my god, it's incredible. I

this year. Oh my god, it's incredible. I

have to say you especially right on the Open AI devices. It's like what latest consumer device have you been like I would actually go and wait outside the store for when I was a kid. Like I can't out for this thing.

>> But the iPod Nanos and the I was like wow thousands. Like now with the new

wow thousands. Like now with the new iPhones, let's be honest, like no one's like, "Yeah, I'm going to like run to the store." It's like, "Ah, whatever."

the store." It's like, "Ah, whatever."

This >> I've forgotten to trade mine in for four years. I use like four generations old,

years. I use like four generations old, you know?

>> 100%. I completely agree. So, I'm so with you, Lucas. Thank you so much for doing this, dude. I've loved having you on. This has been fantastic.

on. This has been fantastic.

>> Awesome. Thank you.