Mitchell Green: Why 50% of VCs Should Not Exist & Why China will Win the AI War

Bite Dance 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

world. Today we have Mitchell Green at Lead Edge joining us. In a world of fluff and framework thinking investors, Mitchell Green is a money maker.

Mitchell has co-led or led investments in insane companies like Alibaba, Benchling, Bite Dance, Graphana among many others. I think 50% of people in

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

companies. People that spin out of like anthropic or open AI and raise money at like$2 billion dollars for a freaking idea. Like there's nothing more than an

idea. Like there's nothing more than an idea in a napkin. Talisite seems

complete lunacy. There's going to be a really big downturn. Markets just don't go up forever. And I think it's going to 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?

favorites. You know why?

>> You got to have us on together.

>> No, I It' be great to have you on together. If you're in London together,

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.

>> Be amazing. Uh listen, I want to start with um something that's actually quite disarming for a lot of investors today, which is bluntly the SAS apocalypse, the sassacre, and we're looking at the markets and they're just in the [ __ ]

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 bulliant 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. You know, portion of our funds can be invested in public equities. So, we're buying companies

equities. So, we're buying companies like Procore, Workday, Appion.

Um, you know, we love Clear Water Analytics, but it's in the process of being taken private, so the stock doesn't move. Um, we're big investors in

doesn't move. Um, we're big investors in Toast, which we've been buying back. We

were early investors in it and sold and are rebying.

These companies aren't going anywhere.

Like, the incumbents have distribution, data, and balance sheets. You know it's it's a fool's errand to think all these companies are going to go away. That

being said, in any period when there is big periods of disruption, you know, you know, there will be new companies that

are created. There will be incumbents

are created. There will be incumbents that thrive and adapt and there will be some incumbents that blow up. Help me

understand. I I love your perspective, but I don't understand it. Workday is 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. Uh well, Workday's AI

incumbent set. Uh well, Workday's AI business is growing super fast inside it. Uh keep in mind they are $10 billion

it. Uh keep in mind they are $10 billion of revenue and like $3 billion of free cash flow. So there is you know law of

cash flow. So there is you know law of large numbers uh for a lot of these companies. You know look it is not

companies. You know look it is not normal for companies to grow like Anthropic or open a have and oh by the way you know you know workday does it with serious profits or a company like bite dance

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 the seat seat look I mean for seatbased pricing

for workday I mean workday is is more tied to like employment you know employment growth in the United States but you know the company you know is it's like high low, you know, low teens, high

single digits grower. But again, it is a huge business. It is like a $10 billion

huge business. It is like a $10 billion revenue company. I actually think what

revenue company. I actually think what people got wrong and why a lot of these stocks, software stocks have actually sold off looking back in hindsight is if

you went 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

general. Like they didn't show enough del. And what I mean by that is you'd

del. 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 19.5% this year. It's a lot of

large numbers. As companies get really

large numbers. As companies get really big, they they desell um and street numbers in general AC all across software were were too high. And so what

what's hap what will happen is, you know, Wall Street analysts, sellside analysts are like, you know, pigeons like you know, squirrels. and as the stock goes down, they're like, "Oh, now now we got to lower my numbers and take

the numbers down." And no, and you know, 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 like own them when

down. You want to like 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. Give it a quarter or two.

Companies will start to then, you know, beat numbers. They'll then they'll raise

beat numbers. They'll then 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

little while. I was always a big fan of Howard Marx 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

opportunity." And the lesson I have on Duo is, "Wow, there really is no floor."

If you don't have earnings or IBIDA, there is no floor in a lot of these things. What we tell people is if you

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 stocks, if

days. But just like if a stocks, if you're an individual and you think you want to own a million bucks, $200,000 of some name, buy $50,000 every time it, you know, it it dips and sells off hard

and maybe you'll never get fully filled, but you just you won't you won't catch a bottom. But the funny thing is if you

bottom. But the funny thing is if you actually do the like long-term analysis on buying just indexes like the NASDAQ or the you know S&P it actually turns out just like if you look at like very

long-term like longitudinal data that if you just actually just buy it on a big down day it's it's nearly impossible to try to try time it we mentioned workday we also have seen recently in workday

Anil Busher 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 like companies are inherently disadvantaged?

>> I would agree with that partially.

I though I do think there are very good CEOs. You need like a growth mindset and

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 anytime you have big technological transformations that um you want the entreprene you want the management team that is run by the

company that is focused on growth that are like they're grow and by the way those are often times entrepreneurs you know another way to think about it is often times And companies are run for margin

earnings or even 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 in 2000 and look what happened and

so we if we had sat here in 99 we would have debated are all the traditional retailers is going to go bust and are all these e-commerce companies going to be gigantic? If you look today at the 10

be gigantic? If you look today at the 10 largest e-commerce companies in the United States, you know, six or seven out of 10 of them are traditional retailers. There are people that were

retailers. There are people that were around way before 99. Walmart, Target,

Home Depot, Lowe's. However, there were a bunch that went bust too. Sears,

Kmart, you know, Montgomery Ward, Bed Bath and Beyond. And you you have to ask yourself why. And most of those

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 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 I wanted to somehow. You said you run a company

to somehow. You said you run a company for growth. You run a company for

for growth. You run a company for margins. Yeah. If we take like a master,

margins. Yeah. If we take like a master, he's running it for growth, which is why free cash flow is in the drains. I mean

now I think it's valued like a,100x free cash flow.

>> Um >> well the capex burn 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 milliondoll

growth? This is the milliondoll question. Is Apple right or is Google,

question. Is Apple right or is Google, Microsoft and Meta, right? And you know, like Apple spending very little right right now, you know, and those other three or four companies are spending

insane amounts of money.

Time will tell. We It's probably somewhere in between is actually probably the right answer. Um, you know, I I would argue though, you know, if if

you are um, you know, it's interesting if Mark Zuckerberg deserves to to go for it. Like, he's it's his business. He

it. Like, he's it's his business. He

built the damn business. Like, I don't think you really have much to say to be like, "Oh, don't bet on the guy." And by the way, he he kind of has to because his competitors are are doing the same thing as well. So um look I mean our

view is that bite dance is the most advanced AI company in the world um in ter and you know it's very underappreciated by the western world like you know how much AI they use um

and how much they're investing in it.

Our view like AI is going to change the world. It's an incredible thing like

world. It's an incredible thing like it's going to now again though we sat here in 99 the word social media doesn't show up. We would never have talked

show up. We would never have talked about Facebook or anything right? It's

$3 trillion of value now. AI is not going to be about the next call center company or the next like workday. I

truly believe what we're seeing right now in the AI and like people investing in a lot of these AI companies across the board. Look, some of them are going

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 like I actually think it's the stuff that's going to start over the next like two to five years. Those are going to be like the giant businesses and I don't even know what it is. I mean

>> we're going to go back to bite 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 transients 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, 100x's or zeros, you should be invested in

stuff. Now, I think you should, we like

stuff. Now, 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

money? The problem is when you invest at 100 times revenues or something, you go 18, you can go some crazy rate for 18 months and you're like, I'm still nowhere near in the money. So, we always like to ask ourselves 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 IRRa and like we we don't drive zeros like we don't we also don't have 20 X's. I think

we've had like two 10Xs ever or something like that, but we've only had like, you know, one or two zeros ever.

And so, it's this environment for us is just kind of weird. It's just it's different. Like,

different. Like, >> 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 is like exploding and like our special sits business, you know, we just did a deal in a company

>> that, you know, in a special sit and put 200 million to work and the company is there's the company is now raising around at 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 few years are they not made a lot more vulnerable in the new

environment that we sit in the like wellpriced company up north in the UK that's doing like accounting whatever >> look one of our companies is is

Graphfana Labs like it just it's a giant business growing crazy fast and like you know It's b it's it's benefiting from a lot of this like 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's

was it was Sequoa and >> Yeah. But like when we invested, nobody

>> Yeah. But like when we invested, nobody knew what the company was. Like it was a bootstrap $12 million software company.

Like us and Lightseed were the first two investors. It was bootstrapped. The guy

investors. It was bootstrapped. The guy

actually built like a $12 million company.

>> How did you find it?

>> We cold calling him. Cold calling the CEO. You cold call. So we have a team of

CEO. You cold call. So we have a team of 18 22 to 24 year olds like pounding the phones calling companies all day long and >> learned from insight.

>> Learned from Yeah. So by the way and they just replicated it with Summit and T8 it um Yeah. So by the way >> I just had Jerry Murdo on the show.

>> Yeah. Yeah. He's fantastic. So if you if the company calls you back it's like hang up the phone. It's a CO call every two days for a month. That's who you want to get on the phone. And look at people are building like amazing

companies. Like we have a business down

companies. Like we have a business down in Florida that makes called Pacemate.

Uh 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 manufacturers's like website. There's lots of different

website. There's lots of different manufacturers, lots of different models.

This is like single pane of glass software for um for cardiac clinics. By

the way, it is like a 99% gross dollar retention business. They these guys when

retention business. They these guys when we first invested it was like 20 million of revenue uh had only had raised eight to get there but only burned three 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.

Um by the way we're going 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 making sure all this stuff is like is

working. the company can now continue to

working. the company can now continue to grow and not act I mean they don't have to fight they're not gonna fart all these people but they can they can keep the same number of people and make people much more productive and I think

that's what people are missing that like I think there's two things one this is going to lead to a giant productivity boom

um and two um in ter like software companies have never been about like R&D this is not semiconductor investing like it's very

different. So if you were to look at

different. So if you were to look at your average software company that goes public, you know, if you look at cumulative spend since inception, it's usually around like 30% is R&D. So like a huge

amount of these businesses are about like sales and marketing, distribution, customer support, things like that. But

like AI will help a lot of those things.

Are you wide that we might see I'm sure you read the Catrini research piece um or saw it come out and you wipe billions off the stock market essentially saying that >> but that's a more incredible thing >> what

>> some random person can write a research report imagine if we had Twitter in 2008 like it's incredible like why don't it's amazing that people are listening to some random research firm versus

listening to people like Stan Ducken Miller Howard Marx Ken Griffin Steve Cohen like Mark Beni off people like Mark Zuckerberg uh you know Jensen Wong who's like software is not dead at all

like yet a random research report can you know get 25 million views and takes itself in the stock market it's crazy >> is this not the ultimate sign though that we're seeing the casinoization of

public markets >> which actually makes it by the way that's the opportunity for long-term investors like you buy you know as Warren Buff said you buy when people are scared like and 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 seated by Julian Robertson in 2008 and 2009. This is nothing like this. This is

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 the indexes were whipping up and down like 8% in like intraday in intraday moves. Like you'd

have 15% swings like this. But that

presents the opportunity. By the way, had you bought in early 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

money. And so, like, this is the opportunity to buy stuff on sale. Now,

again you >> Okay, I'm going to push back on you there and say there was no fundamental like 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

billion market. Mainframes, they came out in 1950. Most banks are run off of mainframes. Oracle is a legacy software

mainframes. Oracle is a legacy software company. Microsoft is a legacy software

company. Microsoft is a legacy software company. SAP is a legacy software

company. SAP is a legacy software company. They are some of the biggest

company. They are some of the biggest software companies in the world. These

companies are not going away. I will bet any amount of money on it. Now though

there will be some that will. So focus

focus on the companies that have 90 95 98% gross dollar retention. Now there

will be new giant companies created 100%. But not like most of these

100%. But not like most of these incumbents will not disappear. They will

like some of them will innovate and become exponentially bigger. Some of

them will grow 5 10 percent a year. I

mean there are a ton of software companies that have been around you know 20 30 years that are still growing. Um

and you know I actually think the biggest disruption you're going to see is in like manufacturing is in like healthcare is in um 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 I think AI could potentially like it's a huge part of cancer could be solved. Dementia

could be solved because you can run drug trials faster. Think about

trials faster. Think about manufacturing. If AI and robotics can

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 him.

>> Totally get that. Going back to what we were just talking about, you were saying about the casinoization, how crazy it is. We mentioned productivity increases.

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, you know, lost over the years. Think about

all the number of re, you know, there's been retailers over the years have gone bust. People innovate. And it's funny, I

bust. People innovate. And it's funny, I was just talking to somebody at one of the world's largest banks, 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 in middle office.

Those people have 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

them. And by the way, the people that don't want to be retrained will be okay, fine, go work for the government then because you know you can do like old school jobs there. But like

a lot of these like companies will retrain people, they'll do different things. It's a it's remarkable

things. It's a it's remarkable throughout history. There's been like

throughout history. There's been like lots of technological disruption over the last hundred years and like people find new things. If you're if everybody's worried about uh everybody's going to lose their job, you got then don't invest in any of these companies

because it's going to be a it would be a complete disaster. It's like I would I

complete disaster. It's like I would I guess I tell people like 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.

Um, at some point by the way the government would get very involved like if if all of a sudden all these jobs start to disappear and you have 10 20 30% inflation sorry unemployment. It's

not 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 GBT.

Like you can't even like get on the system to do work. And by the way we're still 5 years in. It's literally like people woke up a month and a half ago and we're like, "Oh my gosh, all these companies are going to go away." And

like unemployment is going to 30%. Like

it's it's it's 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

invest. You're going to have a bunch of amazing new companies come created.

Well, you're going to have a bunch of them. You'll have some some legacy in

them. You'll have some some legacy in companies that went to zero. Not all of them or anywhere near all of them. You

know, you're still going to go to retailers. you're still gonna get your

retailers. you're still gonna get your haircut like but the um I just think it's gonna be like an amazing time to invest and by the way during periods of volatility and you know the casinoization of the stock market you

want to buy fundamentally good businesses on multiples of earnings.

>> Do you do you worry that the world is just being me that the world is being calcified and calcium the world is just a [ __ ] calcium poly markets replica?

>> It's totally insane. Like I

>> 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' I've joked for years that that social media is like the demise of society. Um

look, I mean Jonathan uh I guess has done a amazing research on like you know this stuff needs to be regulated. It

will be regulated. Um it is incredible though how fast information moves, you know, right? And um just imagine if like

know, right? And um just imagine if like Twitter had been around in 2000 been you know big in like 2008 and 2009. It's

absolutely incredible. And now um I will say that this look the makeup of the stock market is different today than it was you know 20 years ago. Passive you

know passive ETFs are much bigger. The

retail stuff comes and goes um like retail trading but um you just have to buy good businesses when they're on sale. like buy good businesses at multiples of fundamental

if you don't have earnings there is no floor um but if you have earnings like and free cash flow then you know um another thing that people well reason a lot of these stock or stocks and

internet stocks are actually still not cheap is because the stockbased count like the stockbased comp in a lot of these companies is totally nuts like the amount of equity compensation and

dilution to founder of like of like shareholders is 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?

>> It's, you know, 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 like stock option dilution there is and a bunch of these big Silicon Valley companies. It's not

as bad outside of Silicon Valley, but like the delilution is real. Like uh I'm surprised more people don't talk about it.

>> What should happen? Like if you're a SNAP holder, Evan is running a a gifting program right now.

>> Yeah.

>> Like >> I don't know. It's like we're not activist shareholders and I and I um at all. You would like I have a lot of

all. You would like I have a lot of respect for entrepreneurs like Larry Ellison who effectively did a levered recap of

Oracle. You know, he he basically was

Oracle. You know, he he basically was like, I have all this 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

stock. And what did he do in the process? He didn't sell any of his own.

process? He didn't sell any of his own.

So, he just kept making it. you make the share con go down not up. Um people

forget that in companies there's you know it's market cap equals number of shares times price of shares. Um and so like you know and so companies that respect you know that have discipline on

that I think are are powerful. We

>> 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 in the management team buying when they're in the dumps. you know, Service Now CEO who bought $3 million worth

>> and I think Salesforce just came out and said they're going to buy $50 billion of stock or some crazy number 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 Service Now's bought $3 million worth.

>> Okay. Which is less than his car collection.

>> Yeah, but I don't know. Is the company buying a lot of stock back? I don't

know. But you have to ask also ask like how much stock does the CEO of Service Now already own? does he own $300 million of stock? Um, but like that should tell you something. The companies

that the found where the like founders are buying or the companies are buying huge amounts of stock back like that that to us would make one more bullish on that company versus like another

company 100%. H

company 100%. H >> I I would suspect over the next you will as our names come through you know you will see more things like like sales

like Salesforce people put in place big buyback programs to start buying back stock here. I think you'll see it.

stock here. I think you'll see it.

>> We we spoke about bite dance a little bit.

>> Mhm.

>> Everyone for years has been like oh the bite dance discount. It's so cheap. Bite

dance is insane cuz there's the China discount and bite dance 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 casm to shrink? I think it already it to some degree already is. So private

market implied valuation multiple should be should be, you know, determined by public market investments. So like you should argue a software company today like should be getting done in the private markets cheaper than public

markets. It's definitely doesn't always

markets. It's definitely doesn't always occur like that. So look, B, so Alibaba and Tencent should be, you know, two giant um, you know, Chinese companies

should represent roughly how Bidan should trade. I haven't looked at them

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 eBay, not revenue, earnings multiples, and they don't really grow. Now this is a

business that you know grows grows fast grows 25 30% plus a year generates a tremendous amount of earnings and you can stick like an earnings multiple on

those companies on this company and get to a very very big number like fundamental earnings. Um I think

fundamental earnings. Um I think Facebook's trading like 25 30 times earnings right now like stick that multiple but that's maybe that's too high because it's a western company. So

then pick like put the China company multiples on it. I think it is possible to see in a few years that this company's doing, you know, 70, 80, 100 billion of earnings in the next five years. Um,

years. Um, >> yeah, but in a del globalized Trump world, I'm just doing the the kind of alternate argument here just to understand. In a del globalized Trump

understand. In a del globalized Trump world, it's not going to list in the US, is it?

>> 0% chance it'll list in the US. No, I

answer I have no clue, but no, it'll list in Hong Kong. like um that that's where you know a lot of these but you know people have been talking for years that they're going to like delist all

these U these Chinese companies BU [ __ ] Baba they never did like um and keep in mind like Alibaba and 10 cents Alibaba stock is 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. I mean we were buy you know when we were buying bite when we were buying bitean stock like you know you know we were we were

buying it at prices like sub you know around $200 billion like we we thought the risk adjusted reward given the earnings power was just like incredible.

I also think that that um >> don't count China out. I bet they win the AI world. I bet they win it. that

when it's not right but like look the great thing in China is you can build a nuclear power plant in a couple years you can build power plants like no problem we in the US we are going to run into major issues around power >> why do you think they win the AI award just because of the power

>> because of the power resources consumption like number of PhDs like how much they value science and technology and um 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 exponential potentially more efficient. Um,

>> how does that realization change how you invest? I completely hear you and I

invest? I completely hear you and I agree. I think we still dramatically

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?

>> But that's why we own a lot of ch that's why we own a lot of bite dance. Um, but

it's not like winner take all. It's not

that bite dance wins and like Google and Facebook and you know loses. A year ago when I was probably on the show, I don't I don't know if we had talked about like Google. Everybody thought Google was

Google. Everybody thought Google was going to lose. They're like, "Ah, Google's dead. It's done." Like,

Google's dead. It's done." Like,

"Nobody's gonna search it." Seen the stock in the last year. Stocks like

doubled. Now it's going to win everything. Now it's going to beat

everything. Now it's going to beat OpenAI and all these other things. No.

Like they're both they're both going to be fine. The the biggest question for us

be fine. The the biggest question for us on these LLM model companies is can they ever turn like a real can they ever return like a real profit? Like I just don't know the answer. Uh and I don't think anybody really does right now. Um,

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 you're the small local town in Iowa or the small town in, you know, Kansas or Ohio or wherever in Virginia and, you know, they built this giant data center. They employed all your people. They employed a ton of

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

just this big ugly building. I think

you're going to see real local push back and I don't think it's only the United States. I think it's probably Europe as

States. I think it's probably Europe as well. Um and it's like hey you know

well. Um and it's like hey you know these people that are are not better off today than 20 years ago and these things are in their backyard and you know people in Silicon Valley and the coast are making tens of billions of hundred billions hundreds of billions of dollars

off. I'm like I think there's going to

off. I'm like I think there's going to be like real push back and there needs to be regulation on it.

>> Do you not think climate is a luxury problem? We were also worried about it

problem? We were also worried about it in the last 3 to 5 years and now no one gives a [ __ ] about it. Climate investing

is in the drains.

>> We should be worried about it. Like um

it's it's probably important. Look, it's

we've always struggled with how to invest there because of how capital inefficient a lot of those businesses are. Yeah. Um, but I mean like and and

are. Yeah. Um, but I mean like and and I think like just China has some advantages in that respect. Whether it's

like so giant solar farms they can build or whether they they can just they can do things that we we can't do. But I

would expect look if you look at the internet the the biggest innovation in internet has usually is over the last decade or 15 years has come 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. like

that could happen in um you know it was not a surprise to me when Deep Sea came out but don't don't

um underestimate like Chinese uh creativeness and like ingiduity um 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 bite dance but I actually really want your advice on the sell side which is like when you look at a bite dance there's many opportunities to sell in in a lot of these names so

not taking it by dance specifically how do you think about uh you know what we're 3x up on where we are we've been in it for 4 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 under

reunderwite that is actually what it really is. And we're trying to make 2 to

really is. And we're trying to make 2 to 5x in 3 to seven years. If you put that in to a on a curve that's a 25 IR curve, put it into a fund to make a two to two and a halfx net fund. That's what we're

trying to do. Like that's what we tell our investors. So, we're constantly just

our investors. So, we're constantly just rewriting to saying like, okay, like if we were going to sell a bunch of uh bite dance today at 550, which is, you know, where it's been reported that like

General Lanic is selling a bunch and there's other people we've been offered higher than that. And so, I think it's always like what is the probability it can double and and then we to invite Dance, we look at like what fundamental

earnings are and we're like, okay, this is doubling, no problem. Now, if

somebody came to us today and said, "Hey, I'll offer you $1.3 trillion."

We'd sell a bunch. No, because it's not that I don't think the I think the company will do a hundred billion of earnings in the next five years and that's at 20 times that's worth$2 trillion dollars but like there's a risk what does it trade out on a multiple

basis what what would we be on our total investment at that price >> Sean 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

>> we like to oh yes correct what we like to say is is I think this has actually kept us out a lot of trouble too which is like are we in the money 18 months out like that's how we think with a reasonable multiple are in the money 18

months out and you know >> can you like unpack that? What what do you really mean?

>> So like if we invest today and revenues are $20 million with a reasonable model.

Yeah, >> at 18 months out are we in the money like with a reasonable multiple not 50 times revenues >> but do you why with your companies like the pacemaker company I don't want to

pick on them so like 20 to 45 million which is great phenomenal fantastic but like 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 um >> at a good multiple >> yeah we'd make great money by the way you know we forgot what I what did I pay for it Like, you know, we we 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+ companies at Dminus prices. Yeah.

>> Nor do I also want to buy a D-minus company at A+ price.

>> Do you want to buy Do you not want to make that investment? You know, 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

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

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+ price that's like zero. But like if

you can buy a B+ company at an A+ price, we have over the last 20 years, you can make like amazing riskadjusted returns.

But we also buy A+ companies too. And

you can buy like the 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+ company or an A company at

like a a B a B minus C plus price? Those

are like incredible deals. Um can you get in like cheap through buying out old LPs out of an old fund that need liquidity? Um by the way we're you know

liquidity? Um by the way we're you know 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, you know, they have horrible DPIs. You're gonna

have all these LPs that are like, you know what, I'll sell an interest in my this 2013 fund or this 2015 fund and be able to buy stuff, you know, super cheap. But like, look, um, there are

cheap. But like, look, um, there are there 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 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 of it just

that. Like the vast majority of it just depends what you tell your LPs. By the

way, we tell our LPs make 2 to 5x in three to seven years. Rinse and repeat.

generate two to two and a quarter x two to two and a halfx net funds with 29 RS 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 I I'm very good friends with

Jason Lankin from SAS who on on a show with me very recently said oh [ __ ] 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 um the uh I think there 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

VCs. It's private equity alternative access.

>> What makes you say that?

>> There's there's too much money and there's like too many tourists and there's people that don't show like investing. You need to show discipline

investing. You need to show discipline on price. Like go talk to the greatest

on price. Like go talk to the greatest venture investors in the planet and they'll be like um 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. Um,

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

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 though?

>> Probably less. I don't know in some point I don't know if it's 3 years or 5 years or seven years for sure people are going to wake up in 20 in 2030 in 2032 and realize it's oh my god they're still

all in this stuff from 2012 and 2015 like if you weren't selling when are you going to sell that's actually the best advice I would give to to 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

you're winners. Sell 20%, sell 30%, sell 5%. And like continue to get again your

5%. And like continue to get again your job is to return money like you know um >> companies are bought not sold.

>> Yeah. Like I guess marks are opinions.

DPI is math and so like you can 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

whole company. If there's a round being done in a company that you're investors in, especially if you're if you're 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 you know if I can't get some liquidity back to our back to your company." By the way, you can do the

company." By the way, you can do the math if if you build the next giant company and you 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

thing. But like LPs want money back and the people that stay in that are 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 started already seeing so we've always cared about DPI but um I think that the you know we've we've always been really disciplined 2 to 5x 3 to 7 years like

hit it move on. You know, probably a third of our deals have been secondary sales. So, people have accused us of

sales. So, people have accused us of being traders. That's fine. Like, I

being traders. That's fine. Like, 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. Like, they they you know, I have

client. Like, they they you know, I have two clients, entrepreneurs and investors. Without investors, I don't

investors. Without investors, I don't have any money. I don't have a business.

And so, like I think people need to re remember like who pays the bills. Um and

I and I and I I do think that investors are very very very focused on DPI now and I think if you are and and it is

possible with a small early stage fund as a new relative upcomer in the first couple funds you can actually generate amazing KPIs. It's a game you can play.

amazing KPIs. It's a game you can play.

I don't know if you've ever had like for Bris Grindon here or Jose Marin from from like FJ 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

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 customers at all. If you're if respect

to 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

>> correct? It's hard. It's like negative signaling 100%. Versus that's why I'm

signaling 100%. Versus that's why I'm telling younger funds. It's 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 we won't be talking in three years because I'll need to find a new job because I won't have I won't have my second fund.

>> Do you worry about being a trader and that not being an attractive investor to founders?

>> Nope. Because I believe if you uh help founders and do what you say you're going to do, now a lot of investors don't do that either. I I think there's 50 60% of people in this industry that actually probably add negative value to

companies. Um, but if you I the simplest

companies. Um, but if you I the simplest lesson I think entrepreneurs anybody can learn and I learned it early in life is just if you say you're going to do

something actually do it. Like the

number of people that promise like overpromise and you know and underdel like be the reverse underpromise overd deliver. And so like if you've been

deliver. And so like if you've been really helpful to an entrepreneur, helped them recruit, helped them like, you know, uh helped them recruit, helped them like with customers, you sell 20% of your old endings, like who cares?

Keep helping them. I mean, we have we have companies we've sold 100% of that we still help drive customers to. Like

it's like great, by the way, great. You

help me make like five times my money.

Nobody else on the cap table is liquid.

We sold all of our stock. I keep helping you, please. What are the most common

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. Um,

for? Burn money at all costs. Um,

recruiting. They actually just act like they know how to run the business. By

the way, I've never run a company in my life. By the way, I know have like 98%

life. By the way, I know 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 $20 million software company, find entrepreneurs around the table. Help the entre 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 I think and like I just think there's too many knuckleheads. You

know, the worst is somebody, you know, who went to business 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

experts, right? Like I just think it's be humble and don't act like you know because most these myself included have never actually run up. I mean if you

want to start a 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. 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 SEOA and Benchmark are great

and index are great because they help founders and entrepreneurs recruit amazing talent and and 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 cuz I'm like no idea how to do that.

speak to my friend down CPO >> 100% great >> but no idea >> and I think that's what the best entrepreneurs actually want to >> 100%. Uh here's my mid view from seeing

>> 100%. Uh here's my mid view from seeing a load of companies. Uh no, don't want that. You you said there like oh a

that. You you said there like oh a negative is like hey burn money burn money. They say burn money burn money

money. They say burn money burn money cuz 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

double double. It's I need you to go from zero to honestly 3040 for this to be interesting.

>> Well that's about because that's because that's the price that they paid in the deal. like if you if you paid these

deal. like if you if you paid these asinine prices on the way in. By the

way, what's what's really interesting to me in the market right now and we don't even see any of these deals cuz it's not what we do is it's like people that spin out of like are like leave anthropic or

open AI and raise money at like $2 billion or a billion dollars for a freaking idea. Like there's nothing more

freaking idea. Like there's nothing more than an idea in 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 if any of those things actually ever worked? I don't know >> anthropic.

>> What was their first I don't know what the when did like Dustin Moscapus invest? I think it was pretty small.

invest? I think it was pretty small.

>> I it was like billions.

>> No. No. I think the original seed deal was 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 is Dustin will make more money from his anthropic investment than he will from definitely from >> definitely from I don't want to be >> on Facebook though I'm not sure >> yeah I'm not sure about that um we we

said about kind of burn money and they want the growth is the triple triple double double debt there's so many SAS 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 that we by the way call us. We think those things are

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

matters. Like what is your gross dollar retention? So we like here's the deal.

retention? So we like here's the deal.

That's the most important number in in tech companies, gross dollar retention.

What I mean by gross dollar retention too, because everybody wants to quote nets is gross hour. You ended 24 with, you know, 2024 with

20 million of revenue.

What did those same what did you end at 2025 with just those same customers?

No upsells, just downells.

You know, 18 is good. Like you want like 90%.

Um, anything less than 18 we won't touch. great is 19, incredible is 195.

touch. great is 19, incredible is 195.

Like you're looking for 90% gross is good, 95% is great, 98 is amazing. Now

the problem is a 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. I don't and the problem. It's

not when you're 10 million revenue that's the problem. It's when you get to like 150 million in revenue and you're like have 70% gross dollar attention.

they're just like churning through. And

so that's why like the company that's got 95 gross dollar attention 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 Anna plans where the companies are kind of growing at best mid- teens,

what what happens to this generation of growth equity PE investors in tech?

>> So I look I think growth equity and like buyouts are very different. I think even buyouts are very okay. Like I think like people like Helman and Fre like if you want to go to the large cap people like

Helman and Freriedman and um people like Promera are probably slightly more growth oriented and there are probably 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 the financials of Koopa software or you know Anoplan and things like that.

If I was them like I know that all these companies they drive margins from 5% to 40%. The question is how are they doing

40%. The question is how are they doing it which I actually don't know. I um 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

GNA. I would hope they haven't taken the engineering sales headcount from 200 to 20. I suspect they have not, but like

20. I suspect they have not, but like that would worry me if if they had done that, but I suspect they have not. Like

by the way, these people are really smart people. Like and the question is

smart people. Like and the question is if those companies have been bought with no debt, then they they would be investing hugely, I'm sure, in AI stuff like that. They probably already are.

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 buy. 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 today in the gutter and Atlassian which is posting accelerating numbers and it's down 76%.

>> You buy you buy a company like Atlassian. That would be my argument.

Atlassian. That would be my argument.

>> Okay, fantastic. I agree. I think Mike's amazing. I think also founder like

amazing. I think also founder like company >> if I'm Canva I'm looking at this going there's no [ __ ] 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 memeified stock market not just >> it's not good for LPS >> 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.

I mean that that's the reality of it. Um

but I I don't I agree with founders by the way too. Um 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

public. I'm friends with a bunch of guys that run big public.

>> You just had equipment check.

>> Yeah. And by the way they went public by the way stocks actually done quite well like um and actually it's like a derivative play. So it was our

derivative play. So it was our derivative play on AI because build data centers, right? You got to like get a

centers, right? You got to like get a shovel and you got to get like a dump truck. Um, but again, that was a company

truck. Um, 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

company. It's like an equipment rentals business run by a couple 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?

>> Yeah. 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

tech company." No, no, this is an equipment rentals business that uses some technology. It will have, you know,

some technology. It will have, you know, drive higher ebida margins and better utilization rates. And by the way, they

utilization rates. And by the way, they went public because they want to like they they want to like get their brand well known. There are a bunch of

well known. There are a bunch of companies out there, you know, like the Vivas of the world and data dogs and why those companies go public crowd strikes because big enterprise companies are like, "Hey, like are you know how big

are you? Like are you are you like

are you? Like are you are you like survivable?" Because you have the big

survivable?" Because you have the big public companies like being like, "Oh, Microsoft telling people like, "Oh, this company is going to go to business."

You're like, "Not going to business.

It's like a $30 billion company. And so

like being public um 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 like we are very confident will be public company. Like we talk to them up

public company. Like we talk to them up front like listen if your plan is to try to stay private forever you're just not for us. Like we just don't want to

for us. Like we just don't want to invest in you. Not because we don't we don't disrespect you, but it's just like we need to get out of stuff. It's okay.

>> 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."

secondary markets." >> Yeah, that's true. There is now. Um I

just our view is we want to back entrepreneurs that if if we think the thing has a very good shot at going public, we want to hear from 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 on the balance sheet or billion dollars of cash. If they only had 30 million, they'd all be public companies.

Um, just it's the amount of money that's available for these companies is incredible. Now, again, now who knows if

incredible. Now, again, now who knows if I have legitimately 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. Like

>> so just help me understand why would Stripe being public help them buy PayPal?

>> Well, you I mean how are they going to pay for it now? I mean because if if Stripe wasund I don't know what I don't know what the market cap of >> $150 billion for Stripe.

>> For if Stripe was worth 150 and PayPal's worth 50, >> well they'd have a liquid publicly traded stock that they could then merge together. They would be a cash offer and

together. They would be a cash offer and then they'd get the shareholders of PayPal get liquid stock and they would sell the stock. Like that that's a cash 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 going to happen. Public companies don't do all

to happen. Public companies don't do all cash offers. Now could they could they

cash offers. Now could they could they go public in a reverse in a reverse merger? Maybe that's the way. Maybe you

merger? Maybe that's the way. Maybe you

reverse merger into um into PayPal again.

>> There is no freaking way ever. The reality is is I think the only

ever. The reality is 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 in the companies. um into like the only so if Stripe if Stripe was really trying to buy PayPal again who knows it's even true um if they were if they were a public company right now and

they were had $150 billion market cap it probably be less now because the stock market had gone down or whatever say it was 100 billion they would be able to do a like a public public merger like you

could do one like it 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 like 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 aden and the same similarish transaction volume. I'm not

using >> and those examples like I don't know um yes I mean we see rounds get done >> you know Wix is at 4.5 billion and raplets 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? Um,

>> 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 I think most um I think look it surprises me that more growth in private equity investors can't do publiclix inside their funds. I think he's opportunistically but like TCV can. I

think Iconic can. Um I think GA probably can. So I guess probably people can. I

can. So I guess probably people can. I

might surprise a minute more people don't but I think like early stage venture is extremely different than going to back to going to buy Atlassian right now or going to buy workday or

going to buy Salesforce or going to buy you know toast or something like that.

But what surprises me is that more funds like you know 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% like why not go buy it again? Like it surprises me more

people don't do that.

>> Totally get that. kind of going back to the equipment share style you said about that size of IPO a lot of people say the three to10 billion dollar IPO range is just you're too small for anyone to care

it's not meaningful >> in terms of size to actual markets is that [ __ ] 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 2 to3 billion company but I don't think there's any reason you can be can't be a 7 to10 billion company or 5 to10 billion company I Those are like legit. I think

when you get like sub billion or two billion, it's like it's kind of just like a pain in the ass to be a public public company investor. But you can do it. Like who says you can't do it? Uh I

it. Like who says you can't do it? Uh I

actually we wish probably more would.

Why? Because they'd be great small cap stocks and they could actually you can hold them for 10 years and make a ton of money. Like look at that folio. Like the

money. Like look at that folio. Like the

thing was like I think like a billion two billion. I think it was last 700

two billion. I think it was last 700 million mark capital went public and I don't know what it's done the last month or two but like it was like a 10x. You

look at Shopify, >> correct? It's a $2 billion public

>> correct? It's a $2 billion public company.

>> Exactly. And by the way, that's that's what we would hope for. Like you want to find those next companies. You're

>> saying you have to be a certain size in terms of publics. If you apply that to funds, we see $15 billion Andre and $10 billion Thrive.

>> I think it's insane. I think these funds are way too and like just do the math the fun math on like how they're clearly you 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 you can I've even heard people say like you don't even have to have one of them you have had like two or three of them um the amount of money

being thrown at some of these funds and like the size of the funds is astonishing to me I I hope they prove me wrong because it's like good for me too if these funs get so big, these

companies get so big that they can buy a bunch of our companies like that. But um

you know I respect people like benchmark or index like index is growing but it's still index can raise as much money as it wants.

>> Yeah. And it's actually relative a bit billion five or whatever it is.

>> Index is tiny compared to these other ones like and by the way those guys are the best in the world like uh and so you know it's just like I think it just gets really hard like it's crazy like I

>> wh why let me push back on you there.

There's 9 billion in Thrive's growth fund. If they aren't able to put two3

fund. If they aren't able to put two3 billion into cursor or into data bricks, you can break.

>> Yeah, but you're just you have to run to write like a $150 billion companies.

Like that's really freaking big. By the

way, it's steady state companies trade at 10 times earnings. Like I mean that's just what historically we can argue. Is

it 12? Is it eight? Like at steady state when they don't really grow they trade at 10 times earnings. If you invest in something that's worth like it's worth a hundred billion, you're effectively saying to make a double with delution,

it's probably $250 billion. Like that's

making the bet it's going to do $2 billion of earnings. There aren't that many companies that do $25 billion of earnings. Like it's freaking hard. Like

earnings. Like it's freaking hard. Like

it's um so I I now again that doesn't mean you can't make a lot of money between then and the steady state. Um

you know if they go out and it's grown 50% a year, but again I would say there's too much money chasing too few things. But again, AI is gonna create a

things. But again, AI is gonna create a bunch of great new companies. And so

like again, and these guys probably will go find, if anybody's going to be on the bandwagon to find the next giant company, the you know, the social media equivalent in the next 5 years, it will

probably be one of these funds. And so

like I see I can see the argument as well.

>> Everyone says that you need to be big or boutique. So does that do you agree that

boutique. So does that do you agree that you die in the middle?

>> No, I don't think so. I wouldn't bet against people like benchmark or index at all. I think you can stay you can

at all. I think you can stay you can stay nimble. um they will just those

stay nimble. um they will just those funds will invest earlier and they you know they probably won't obviously their their percentage ownership along the way will just get diluted over time but like

if anybody's going to find the next I would I would give index or benchmark just as much probability to find the

next open AI or anthropic is as Thrive or um you know anybody else. I you seem very focused on praising index which I love that I have no idea. No, I love Danny and Danny's friend.

>> What specifically about index is impressive.

>> I just think like watching just looking at the returns like it's just the returns in 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 worldclass returns you're doing something like very unique. Does

kingmaking exist? Kingmaking is when you get Sequoa and Andre and then Benchmark and then D 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 there'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. Um, but anth I give the guys at Menllo a huge I give like Matt Murphy's a buddy of mine a huge amount of credit. Like when they

did anthropic, it was not obvious. Like

it was highly it was like are you nuts?

Like um and look I mean he's right. So

>> totally agree. Let's do a quick fire around. My friend, what have you changed

around. 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 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 Freeman, founder of Zamron. We ne we uh we we whiteboarded how to save money with Starwood Airline Points and like uh and sorry, Starwood Hotel points and Delta Airline Points. Like he's just

like a great humble guy like normal guy like and he runs obviously AI at Facebook. You can invest in one seed

Facebook. You can invest in one seed firm, one series A firm, and one growth firm. Which do you choose?

firm. Which do you choose?

>> A series A fund would probably be benchmark.

Um, growth fund would be myself because that mean 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

though. We don't really compete against them because they're more Silicon Valley. We're outside Silicon Valley

Valley. We're outside Silicon Valley >> seed fund.

I don't know. on the seed fund stuff.

It's it's like oh another one we don't have much experience with them but I think the found I mean the founder fund guys have like the returns are totally nuts. Um so that would be another really

nuts. Um so that would be another really good fun as well.

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

>> hardest decision has been to to hire people that have the kind of same

um 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 so

for young people the hardest decision is actually the hardest decision was did we should should we have in like n 2017 and

18 like and 16 like pay like 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 uh I mean Procore, we were in it tiny amount. We did the deal with Bessmer, put a tiny amount of money in and like we were in a position to lead the next round that I kind of did and then two rounds later we sold to him. Now again, this the decision to

him. Now again, this the decision to sell actually wasn't that big a deal because it wasn't that big a position.

No, I mean the stake was not actually investing. Oh, I don't know. We also got

investing. Oh, I don't know. We also got $2 million in the Shopify IPO because we knew the founders and um that would have returned our second fund like 2x had we just not sold the stock like didn't have to do anything.

>> What investor do you most respect who does not get spotlight? Probably my

partner Nect actually. Um I just think he's like insanely disciplined. His like

you know like the like loss ratios. I I

mean maybe lost I don't think he's ever lost money. Maybe he's lost money in one

lost money. Maybe he's lost money in one deal ever. Um no. Okay. He's never had

deal ever. Um no. Okay. He's never had 10 X's or 20 X's either. Probably my

part anyway.

>> 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

bad downturn. It's going to be, you know, it's different than 99 and 2000, but there's going to be a really big big downturn. And like markets just don't go

downturn. And like markets just don't go up forever. Economies just don't go up

up forever. Economies just don't go up forever. Uh I think there's a lot of

forever. Uh I think there's a lot of policies in the government in the world like right now that might end really bad. That'll be and I think it's going

bad. That'll be and I think it's going to happen in the next 10 years. That'll

be the best time ever to invest. And

with combined like the productivity booms like that you're gonna have with AI, it's like you avoid the gen one AI companies just like you know if you had avoided the you know internet 1.0 companies and then think about all the

internet the the internet companies that were started in like 03 to like 06 and like I think the same thing could happen with AI which again could benefit like

an anthro like a thrive or a Andre 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 Yeah. If you don't have money, you're out of the game. So,

>> dude, this has been such a pleasure.

Thank you so much.

>> Thanks for having me in.