← Generative Now | AI Builders on Creating the Future
Generative Now | AI Builders on Creating the Future
Generative Quarterly with Semil Shah: AI Expectations vs Reality, Tech Trends, and 2025 Predictions
01:03:25
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Foreign.
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And welcome to Generative Now. I am Michael McDanough. I am a partner at Lightspeed. We are in the final stretch of the year. And so I am back with my friend and fellow investor Samil Shah. We have another Generative quarterly conversation where we ask each other if 2024 lived up to our outsized expectations for AI. Samil and I also dissect all the trends of 2024. Driverless AI devices, Jensen Huang's rockstar status, and the tech takeover of DC that we expect in 2025. So take a listen to this conversation with Samil Shah. Hey, Samil, Mike.
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How you doing?
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Doing well, doing well. Good. Good to see you. I don't, I don't see you all. And we talk a lot, but I've never seen this background.
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So I'm on the move today out of the home office.
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B
How long have you had this office?
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Oh, it's just a downtown, like just recent. It's just downtown. It's very central. It's just an escape hatch.
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Got it, got it.
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Yeah.
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Well, it's been, it's been a big year, obviously, 2024, ton of ton of momentum, continued hype around all things AI. But I think a lot of people, when you really dig in, feel like it was a little bit of a letdown. Like 2023 was the year of, like, was the breakout year. Right. And then 2024 was a little bit of reality setting in.
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I don't know. I mean, I think, I don't know what people were expecting or maybe their expectations were too high, but it seemed like there was a lot of technical advancements and a lot of really smart people building in and around AI and continuing to build. And it's sort of up and down the stack. I mean, you see, you see people starting new things that people like us or around us are really excited by, and you see large companies making huge capex investments in it. So it feels like it's just taken over the entire conversation. So from my view, it seems like tech advancement or in and around AI, up and down, the stack is still moving. If it's a letdown, it may be that, like, some of that could be pricing related or just momentum related, but those things kind of wax and wane, I think.
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Well, so pricing related, that's actually another thing I want to talk about, like fundraises. But I think progress seemed to stall a little bit. I think a lot of people were expecting GBD5. I mean, how many times were we hearing, oh, GPT5 is right around the Corner. Like, if you think about how the models sort of act today as opposed to a year ago, I don't know, it doesn't feel that different even like some of, like in the media formats.
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You know, I mean, I think a lot of people probably just assumed they, you know, like, I think folks that we work with and in our industry, this is a good skill because the following skill, they sort of extrapolate very quickly of what can go right, and then they conflate that with. It should happen sooner. And I think the reality is that you have to take the good with the bad. I think the good is that people would just assume if you listen to Friedberg on All in Pod, he'll just say, yeah, you'll be able to just narrate a script and a background and audio and everything and create your own personalized movie and content. And, yeah, you will be able to do that. The question is when and for how much? And so when you add time and money or compute, in this case as a vector, I think people's expectations might just be a little bit out of place.
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Yeah. Yeah, Maybe it's like we had our minds so blown in 2023, just like, absolutely blown. And then you start thinking about what's possible and believing that everything you're thinking is possible. And by the way, it probably is, but given the rate of change in 23, maybe it was unrealistic to assume that that rate would continue in 24.
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I also just think the cost will catch up in people. So I think I view it as all very positive and people would compare it to iPhone moment and putting a computer in a bunch of people's pockets. I think this is bigger. I'm more of like the Peter Thiel sort of. When he said kind of, I think he said on Rogan, it feels more like the advent of the Internet and potentially bigger in terms of capture value capture. So I think the question is when and how much will it cost to get there? And I think those are just unclear.
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When. When did you. When did you start thinking, like. Like, this is bigger than the iPhone. This is the. This is the Internet level. Like, when did that click for you?
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Was that this year?
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Was that last year?
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I'd say kind of last year and clicking more. I just think of it as like, you know, I'm sure you've talked with Nabil about this, right? This, like, this is a horizontal thing. Think Jeff Bezos just talked about this a few weeks ago at the New York Times DealBook Summit. So, yeah, probably about a Year of just thinking like the Internet connected different people and created networks and created an excuse for different graphs, you know, including E commerce, et cetera, et cetera, et cetera. This seems much more, even more horizontal and the ability for more and more networks of computers rather than just people and agents working within those networks to do things 24, 7 and to go into different fields to pull together, research, make research a reality. All those sorts of things that we can pontificate about. Like to me it's just a matter of when.
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Yeah, no, I agree with that. I agree with that as well.
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Maybe, maybe one difference is that the tough part about it and teal goes into it on the Rogan podcast from the summer, but like the Internet sort of leveled an economic playing field for folks who had access to the Internet and could read write content into the Internet. I think the value captured here may go to like fewer people and so could be more disruptive economically that way. And so I don't really know what the implications are of that, but I would say like listening to Lex Friedman, Mark Andreessen podcast or the Joe Rogan podcast, those kind of things. When they talk about AI and value capture those say pretty solid arguments. I wouldn't take credit myself.
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Who is the small group of people is that saying because it's expensive, because there's a finite resource that you need to be able to access this stuff. And who has that resource?
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Well, you can think about it. There's the chips, the data centers, the energy. People have already started peeling back all the layers of what's needed to go. And so you can read the tea leaves from the CapEx expenditures. And so people want it to be there. And it's kind of a railroad time. So people are buying the land, building out the data centers, storing chips, building new chips. So the innovation piece and the economic activity associated with it is fantastic. I mean it seems like it'd be hard to imagine anything like this in our lifetimes, frankly.
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Don't you think, like we could also get to a place where this stuff is just as accessible as the Internet is. And in that, in that respect, like does it, does it then become more democratized than just like a select few having access?
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I think this is like the open source argument that you and I have talked about before. And I do think there's, there's good arguments for having open source capabilities, there's good arguments for having closed source networks for security, security reasons, things like that. I don't really know which way it's going to go and Maybe it's both. Maybe it's open source with managed services on top. I, I don't know. I mean, it feels like it's all moving so, so fast. But I wonder if like the costs and the, the costs are catching up with all of us. You know, that, that to me seems like a big unknown. And you know, the line I've been using with other investor friends is like, people in our industry have conflated the, this sort of inevitability and the intoxication of the possibility of what these, this horizontal AI shift can bring with like at any price. And so, you know, again, it's sort of cliche now for VCs to talk about that. I, I've just never known how to like price growth deals to begin with before AI and now it just seems like totally it's there. There's no rhyme or reason for it.
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Yep, yep, that makes sense. All right, so that's, so that's like what I was, what I was calling stalled progress. But maybe, maybe that's actually not right. I, I opened that last one up with sort of like, hey, there's been a letdown here. But now let's hit sort of the other side of the coin, which you alluded to at the beginning of that topic, which was sort of pricing funding. We saw some of the biggest fundraises ever in the history of venture over the past year. Two XAI rounds or, sorry, one, one confirmed, another there's rumors of, that I've seen in the media. Maybe by the time this episode drops, maybe that will or will not be confirmed. We'll see. Obviously the OpenAI funding round, what was that? 150, 160 billion valuation. These are, these are just crazy numbers, right? These are big, big numbers. To your point, of, of maybe at any price. Yeah.
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I don't know.
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What, what do you think about this? I mean, we were basically in, we were in a trough of, a trough of sorrow for NVC for a couple of years and now we're literally seeing the biggest funding ever.
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What stayed the same is that there's just these compounding effects. You know, you combine VC excitement and the huge funds with the scale and opportunity and intoxication of what the OpenAI's and X X AIs of the world can do. And you get a lot of intoxicated behavior, but it may lead to like good times, you know, you don't know. I think the one thing that's different now is that maybe from the last couple times we, we talk about this topic is that every quarter it feels more and more likely that like, oh, hey, SpaceX may stay private forever and like OpenAI may like stay private forever. And like maybe perplexity stays private forever. Like that feels like an unknown. And I don't know if you know this guy, Mark Rowan, he's, I think he's one of the co founders or like CO CEOs of Blackstone. He's someone I follow online because he's just, when he gives an interview, it's like extremely well reasoned. Like he's, I, I don't know like.
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Half of what he talks about that he's been on.
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Yeah, I mean if you, if you search on him on YouTube, I mean he definitely gives interviews, but he's selective about the interviews, you know. But he was saying, now I'm parroting what he's saying. This is not my own thought, but he had something that stuck with me, which was he said for the last 30ish years that he's been in the business, the conventional wisdom has been that hey, if you're a large investor, public markets are safe and private markets are risky. Okay. And like that's probably how you and I grew up. His view now is like, that's actually flipped. There's been a realignment where like potentially for long term, large institutional investors, private markets offer more stability and actually public markets are riskier. And I'm watering down his argument. But like, I think what he's saying is that like the intense liquidity and like algorithms running these, these public market trades distort value versus like and create a lot of problems. So it's the old Andreessen argument of like you know, 10 years ago, you know, why would you go public when you're, you're basically beaten. You can be beaten down any day or any week by an activist or an algorithm basically. And so now that technology is also there. So like if you read Matt Levine from Bloomberg, it's basically a solved technology problem that you can run these tenders now and do that. So OpenAI is doing that. So I think that's the one thing that's really changed, which is if there's more and more money going into private markets, more and more companies wanting to stay private. This is the 10 decade ago and recent argument coming to fruition today. And enough liquidity where people inside OpenAI, they can leave as like with eight figures before an IPO. It seems like in that chain it's better for everybody. Right now, I don't know how many companies will reach that level of Demand. That's probably the bottleneck where it's like you have these premium. Premium assets.
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Yeah. What does that do to venture?
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I mean, I think we're starting to see they have to become multi strategy. And part of the multi strategy, quote unquote, is to rotate in and out of things before ipo. So like the traditional conventional wisdom is the benchmark model. You join Mike Magnano starts a company, it's starting to scale. You join at the a, you take 20%, you join the board, you're with Mike and the co founders for the rest of their journey. You train them to go public, and then, you know, you book a return. Maybe you trade in and out more of these things.
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A lot harder though, right, to trade in and out. Especially if it's not one of those like super premium companies, which you mentioned.
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Yeah. So then it becomes like, if you go ipo, it, it'll sort of be like, oh, if you're going IPO, you're actually not one of those top 10 premium companies. Right. Okay. Right.
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Yeah. I guess in that world, does the bar get lower to ipo?
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This is out of my zone of confidence for sure. But what I've heard from other people and I always go to the Goldman Sachs annual tech event right before Thanksgiving in Vegas. So this is actually pretty topical because I talk to a bunch of people about these things just to learn and essentially the way the math has worked because basically if you're an investment banker the last three or four years, you haven't had IPO revenue. You've had no M and A revenue. It's just super dry. Even before that, the bar used to be when you had anchor or I started in venture. Can your startup get to 100 million of annual recurring revenue with some growth and then you could be public. Now it feels like it's 300, 400 million.
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Yeah.
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And there's like, technically you can, I think, do a smaller cap listing, but there, there aren't banks out there willing to do that because it's basically all the banks have gotten really big.
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Yeah.
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And then the other thing that I think Friedberg, I can't remember what episode it was on all in, but Friedberg had a good review of like the Coinbase and Slack listing where like, generally there's two types of IPOs. If I'm paraphrasing him, there's ones where you can actually go IP and also raise capital as part of it and that has lockup requirements. Or you can do these direct listings where you list on exchange. Oh, Spotify was. Yeah. And you would know more than me. And you're not raising capital and everyone's liquid as soon as you hit the exchange.
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Yep. I think there is still a lockup. I could be wrong, but yeah, different idea though.
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Different idea. And so maybe we see more people doing that. I just don't know. Like, I don't know how it changes vc because if the funds keep getting bigger and these companies start growing faster and there's fewer of them, there'll be a race flight to quality and the current generation of entrepreneurs. I don't mean this pejoratively. The majority of them, even if they reach scale, don't know how to take that next step and say, hey, we have to go public or hey, we have to sell or hey, can we stay private longer? It's very difficult. Even some of the best CEOs I work with who have scaled to that level still don't know exactly what to do.
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Yeah, super interesting. Yeah. I wonder if we'll see more opportunities or options for private companies to seek liquidity or find, you know, or, or, or enable investors to sort of like swap in or swap out, like you're saying. I don't know what that looks like. I'm also, this is not my area of expertise, but that could be super interesting.
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I mean, SpaceX is probably the HBS case study on that.
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Let's talk about these sort of AI device flops. There were a lot of startups this year that tried to bring AI to physical devices. We'll talk about incumbents too, but at least from the startups or these very hyped products, Humane, the rabbit to a certain extent, a couple other small ones here and there, they all just kind of flopped. I don't know. That was, I don't know if that's necessarily surprising, but that's certain to be a little bit of a, it seemed to be a little bit of a theme this year.
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Well, I want to, I want to learn from you because I know you spent a lot of time on this. So like your, your take will be 100x better than mine. I, I think that in the consumer device, let's say consumer AI device lane, you're adding a lot of risk factors already to something that's risky. So it's like, do I want to purchase new hardware, do I want to connect it to my phone, do I want to charge a new thing? And all these sort of things. So when you add all those layers or barriers into consumer behavior, the benefit has to 10x outweigh all the work and overhead you have to do and I'm sure something will pop up, I just don't know what it is. And then the other vector is like, I can't remember if you and I talked about these, like Ray Ban meta, you know, that that's something, I think that's just super interesting and I use those a lot in the summer.
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Oh, really?
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Oh yeah, yeah.
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The ones with AI in them, like the overlay and stuff.
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No, I have the last version so like I'll get the new version. But I'm, I'm just a huge fan of that with like the music and like not having your AirPods in, so I don't know how that'll change all of that too. Like, I'm not really sure but, but I think maybe, maybe to, to wrap on that. Like, I do think something like a key fob or something that you could just talk to or ask questions to, that's like just voice, you know. I do think that will happen at some point, but, but again, it could be the Watch too. Yeah, right.
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I think a lot about the watch. I, I, I feel like the Apple Watch is in very theoretically, I mean, I, I also think Apple's made some mistakes here with AI so far, but like in theory the Apple Watch seems like a very, very important opportunity for Apple.
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And the AirPods.
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Right, and the AirPods. And the AirPods, absolutely. Yeah, I completely agree with that.
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What's your view? As in, what's your view as an investor though? Like, obviously you have to track all these new consumer AI coming. You probably want one, you probably want one for yourself. You want it to work.
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I buy all these things, like as soon as they come out, I buy, you know, I pre order them. I've got one coming, I think within the next couple of weeks. Yeah, Partially because it's my job, partially because I'm, you know, I'm just, I don't know, I'm, I'm, I'm, I'm a nerd for this stuff. I remember getting like, Remember the Pebble Watch back in the day? Like, I think I got like the first Pebble Watch. Like, I'm just always into this stuff. But no, I think as an investor, you know, when I've looked at these, it's been, it's been hard to sort of build conviction. I, I'm not, I actually am an investor that sort of, I try not to have too many hard and fast rules because nobody knows anything, including try.
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Everything and see what clicks.
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No, I, I guess I'm Just saying I'm never going to be like, I will never invest in a hardware product. I just, I don't know, maybe. But I, I do think as the year has gone on I've, I've, it's, it feels hard for me to rationalize some of these things. I just think there's so much risk as a startup in, you know, the, the supply chain for hardware, getting the technology right and then going up against obviously the incumbents.
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And isn't OpenAI like working on a phone?
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OpenAI working data stuff? Yeah, I mean I saw, I saw something recently, a startup product, technology, super cool. Like almost nothing bad I can say about the product, the technology, but it's like, yeah, it's gonna take us three years to get this thing to market because of, you know, the supply chain and stuff. And three years just feels like an eternity, especially in AI land, especially when we already know these incumbents are building these things. You know, when all these, these smart speakers came out, Kindle, Google Home, you know, and then to some extent Siri plays in this world with the watch and the phone, it was a problem that these things are all on different platforms. But the problem was somewhat mitigated by the fact that none of this stuff was actually that useful. Right. They were, they, they were, they were just setting, you know, setting timers and playing Spotify and whatever. But I think the moment this stuff becomes really good, I think that fragmentation becomes kind of a problem for the user.
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Yeah, I totally agree with that. I think that's a great insight.
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I'm actually wondering if the best positioned company here is the company that can do this horizontally.
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Well, that's like Xiaomi in China, right? Yeah. They basically took over your home, which Apple tried to do. And they have a good position with their mobile devices, Apple tv, but they've really, they really haven't invested in Apple tv. Yeah, I think I know you talked. Oh by the way, I listened to your MG Pod. Yeah, that was great. It was great.
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He's great to hear his larger than life mg.
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Totally a legend. I think he's been talking about just them actually doing the tv, you know, Apple.
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Yeah, yeah, he's talked about that before. I'm thinking very specifically about OpenAI. I think if OpenAI can become indispensable to the consumer, they will be in a really strong position to integrate with all of these players and be that horizontal glue that kind of connects all the devices. Agnostic of who made them, you know.
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I see. So like they would go to the hyperscalers yeah, basically say give us premium access and then that could be the control point to like telling it what to do and like learning your preferences and doing.
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Totally. I mean you can already see this. They have the integration with the iPhone. Right. Imagine that makes its way into the HomePod. I don't, I don't even know if.
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People still buy that.
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But like, and they do something similar with Google, I think that's a bit of a long shot because Google obviously has Gemini and they're going to lean really hard into this. But I don't know if you fast forward five years into the future and OpenAI is the dominant AI and sort of voice interface, I don't know, maybe they're in a position where they can do this. This was actually a huge part of Spotify's strategy and it's fairly well known that Spotify, you know, from, from very early on really focused on what they call ubiquity, which is being ubiquitous across all platforms and devices and just, and being present and being there. And that gave them a big leg up and leverage over say Apple Music, which wasn't available on Google devices or in your car, on your smart speaker, on your Google home or your Alexa. Right. So I wonder if OpenAI can do something similar.
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Yeah, I hadn't thought about that way. I mean, your insight is right. Like if I were to summarize what you just said, which I had never thought about before, the fragmentation of all these home devices didn't really pose a problem to folks like you and I or people at home because the service capability was limited. But if it gets playing my Spotify, you know. Yeah, but if it gets to a point where the AI gets really good, the fragmentation across these platforms will be a problem because then it's like I want to just connect my Spotify to my Sonos to my Amazon to.
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And I wanted to know my preferences and know what I ate for dinner last night.
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Yeah, it's too much of a loop. So like. Yeah, what's the glue, the personalized glue that brings it together? That, that future that you articulated feels more likely than one of those platforms dominating it because they haven't shown, they've shown weakness in a lot of these categories.
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Yeah, I think Google could win that. I put more stock in Google to win that than Apple, actually. I don't know. Well, they won't judge on that a.
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Little bit, but like Pixel, they, they need to flood the market with Pixel.
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They need to flood. Yeah, that's the. I was just going to say that Apple's got the hardware advantage, Google's got the software advantage. I feel like, yeah, they would need to make Pixel as popular as the iPhone.
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Yeah, that's fascinating. I hadn't thought about any of that. I mean, I've kind of given up on the smart home view, so I think that's a super interesting thesis. Like, very optimistic.
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Do you use it. You don't have, like, smartphone home stuff?
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Not really. Really?
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Like you've stopped over the years or.
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I just was never really interested in it. Like, it feels like the juice isn't worth the squeeze.
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Yeah, it's. It's pain. I. I have invested in it quite a bit and I have. I have a very connected setup. I've got cameras, I've got thermostats, I've got hubs.
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Like, we. We have that, but it's all. It's all just different platforms and it's like a point solution. So I meant, like, trying to connect everything in some kind of harmonious way just felt like a mile too far.
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B
Yeah, so. So I did that and I would say it's. It's pain in the ass, I think, to your point. And it's brittle.
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Brittle, yes. Yeah. It's like doing an oauth connection to, like, LinkedIn. Right. It's worse than that.
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Yeah, it. I actually had a huge problem with it recently where, like, I was trying to add all these cameras, but they weren't working properly. And so I, like, removed some cameras as a way to almost, like, reset it and it just blew up my whole setup. There was like a bug and it just zapped my whole setup. Meanwhile, I have cameras, like, hanging off the roof that you have to physically scan to reconnect them. Like, it's. I had to get on a ladder. Like, it was.
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You're a better person than me. I just would give up. It's just not worth it.
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B
Next thing, we should cover 2024 sort of surprises. Jensen is a rock star. Like. Like, possibly. We've never seen a tech CEO be a rock star before. This is a guy who's literally signing autographs like on. On women's physical bodies. Like, I mean, I've never seen a tech CEO be a celebrity or a rock star. Like this guy. I mean, even Zuck, you know, Zuck. Zuck has become very, very, very. What do they call based. Based Zuckerberg. But Jensen arguably is even more of a celebrity than Zuck is. This. This is out of nowhere for me.
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A
Yeah. I mean, I think it's a great story and I I think when he gives. His interviews are so consistent and authentic. And, you know, if you. If you listen to any of those interviews, like, they're. They're very. Like his philosophy just seems very consistent. He's been doing this a long time, and I think he leans into the. It appears like. I mean, obviously he's got publicists now and people helping him, but it seems like he leans into the fun of it, but doesn't get. I think so. Yeah.
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B
Yeah.
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I mean, but like, you know, like you said, these kind of rock star viral moments where he's had, you know, he has pictures of him flying around the Internet, whether it's his jacket or, you know, signing people's bodies or whatever. But I also don't think he's gets enwrapped in the. In the fame part of it where. Where like, his humility doesn't get overtaken, you know?
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Yeah.
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Do you think.
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How much do you think is intentional.
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About his Persona now, his public Persona? Yeah, I don't think you get up there and do all these interviews and, like, be calm and say these things that are your philosophy without it rooted in something deeper. Yeah, you know, I think people would see through that. And it's hard to find other CEOs. Like, I think when you took. When you hear like a Bezos interview and he goes into, like, how he designs a team meeting or something, you're like, okay, this guy's been through a lot of team meetings and really thought about how to do it. Like, can't really fake that, you know, in terms of, like the leather jacket or the. The rockstar moments. I think of it, maybe it's charitable that he's just like, leaning or accenting into what he's already doing and just kind of layering in a little more mustard. But that. That's sort of how he is.
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B
I mean, how much is this the sign of some sort of, you know, bubble or, you know, stock price sort of inflated kind of mania? I mean, a couple years ago.
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There.
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Were crypto celebrities that are now in jail. Right. You know what I mean?
- [31:52]
A
Yeah. Yeah. I think because Jensen's been doing this for 30 plus years. One of my mentors just said he's been very successful. Multiple companies he started, some went public, some were acquired for huge amounts. So he's just been around the block. And so he said he's seen people get obscenely wealthy at different ages. And he says, like, when people get obscenely wealthy when they're really young, they're more likely to be a jerk. But like, if someone gets it late 40s, 50s, 60s, they're more like, they're a little more mature. So I do think some of that is at play here where it's just like compounding at the end. I also think of Jensen and again, maybe I'm giving him too much credit as someone who's like trying to make sure the mailroom guys and the secretaries and the people that work the grounds in Nvidia go home with eight figures. And I think he takes that pretty seriously, given his roots. I also think we may have done a pod early this summer where the bloom was coming off the rows of AI just six months ago, a little bit where people were starting to slow down and back up and they just blast the estimates every quarter. So they are the straw that stirs a drink. Now in terms of this industry. And if you're thinking about the risk, I don't think of it as so much a bubble. I think even more as the risks are greater given the size of the mountain. So there's the China anti monopoly sort of anti trading risk. There's a risk around like, hey, if everyone, you have this advantage in chips, are other people going to be building chips? The data center wars, right? Government risk. Maybe they become so big and powerful that the government sets eyes on them. Like that's how I'd be thinking about it. But. But the chips part feels far away. The China stuff I'm is not qualified to opine on, I don't know how that will work. I don't see the government going after Nvidia because I think we're, we're past that era now. I think people want to let this stuff loose. And if one company becomes a $10 trillion company, so be it. Amazon will be a $10 trillion company. Nvidia probably will become a $10 trillion company. Google will probably be a $10 trillion company. So that's the trajectory we're on where the overall the flood of money around the world is coming.
- [34:51]
B
Here.
- [34:53]
A
Markets have basically survived into a soft landing. Like two, three years ago, we wouldn't be talking about all this stuff. We were thinking the world economic engine would die. And then basically we're entering, I think people, after a number of years of regulatory crackdown are sort of, the gloves are off now. And so it just feels like there's going to be a lot of room to run. So it may be a new kind of bubble, I don't know. But that's where fortunes are made.
- [35:28]
B
Good opportunity to transition to a little bit on the politics side, Trump won. We don't need to necessarily get into whether or not that was or wasn't a surprise or we don't need to get in personal politics. But maybe the implication of that on kind of tech and the tech takeover of Washington D.C. was this a surprise? And by the way, you know, obviously lots of people from our industry now, now moving into, into vc. We've got David Sachs, new aizar, we've got, you know, other folks from the industry moving in. Congrats to all them. But yeah, was this, was this a surprise to you, this sort of tech takeover of DC and what do you think we, we have to look forward to?
- [36:12]
A
I would characterize it a little bit different. I don't think it was like a tech take over. I just think of it as like a reorientation around how the government from, from the viewpoint of the, of the United States government, their stance towards enabling, supporting, accelerating technologies both for the domestic economy and increased opportunities for folks and also internationally as a competitive advantage and security posture. Okay, so it feels pretty clear in an apolitical statement almost to say that that has changed. Felt like it's changed 180. And I think that it has unleashed a lot of enthusiasm around tech from when before it was sort of like, I don't know what the right word is, but like gun shy, you know, not really sure how to interact with the government. So will there be negative effects of this shift? I'm sure unintended consequences. But like overall it seems very positive for the economy. It seems really positive for proliferation of technologies. Again, some of those could have in the short term adverse effects like robots and AI and labor force stuff or call centers, et cetera, or crypto. Right. Who knows. But then also I think it's a more real politic view of how the world is interacting and how states are interacting with each other and the type of warfare that is now being conducted or the type of espionage that is now being conducted. It seems a more real approach to those situations. So I think that these markets for entrepreneurs, for investors like us, will have a lot of room to run if that kind of openness stays now because it's actually very tough. Regardless of what political candidate you're for, which party you're for, it feels like that genie is now out of the bottle and it would be very hard, especially from that international competitive point of view and the security posture point of view, to actually go back.
- [38:42]
B
Yeah, I think that's right. And one thing I am definitely wondering about and curious to get Your take on it is the conversation we were having earlier around public markets versus private markets versus M&A opportunities. What do you expect the near term impact of these changes to be on our business business of startups, vc?
- [39:01]
A
This is what I talked to a lot of people at Goldman event about too, which was kind of, again, I'm just parroting the synthesis of what I heard. I don't know but I talked to a lot of bankers and a lot of large investors, institutional investors and large investment funds. Basically they felt that in terms of IPOs, they're not expecting 2025 to be like a watershed moment for IPOs where there's just the flow of lava underneath a volcano that just erupts because of pent up demand. I think that they view it as a trickle for next year and it will take a while.
- [39:52]
B
And, and can you explain that a little bit? Like what's happening?
- [39:56]
A
I think just like, I, I don't know, that was just a consensus view. I, I really don't know. I don't know. When I, when I started repeating that to other people they were like, yeah, I believe that too. I believe that too. Like it's just not going to change overnight. I think people maybe want to see what the next three to six months also bring. Like there could be a lot of just change that. It's hard to model for, you know, a lot of distraction out there. And then in terms of M and A, like I think a lot of people, again this is the extrapolation of people in tech when they're very optimistic and you're like, ah, we'll just start again. I'm not sure it will because the rules are still the same. Like you still have to disclose this stuff. I do think there'll be less of a fear of like M and a scrutiny but again, I don't know how many high quality assets are there to actually pick from and they may take that three to six months to just wait and see what's actually going to happen. Are these nominees going to stick? What are their first moves going to be? I think in 2025 is just a year of let's see where the dust settles. Even though it feels like overall a good trajectory. I remember in the beginning of the pandemic or like the beginning of the downturn, Ukraine war, like there were these memes on, on Twitter, like stay alive till 25. And last year it felt like people changed it to like actually I am in that, like stay alive till 26.
- [41:27]
B
Yeah, I, I think, I think I Agree with you on the IPO side, M& A. I'm, I'm a little more optimistic for if it turns out that, you know, there is a, there is a regime change, which it seems like there's going to be. And if that regime is more friendly to M and A, my guess is. And, and, and maybe, and maybe your point is, like, we, we have to like, see, we have to like, see proof of that. I think, I think I, I would expect a flurry partially because the market has been ripping now for a while. A lot of these big companies are sitting on a lot of, a lot of cash.
- [42:10]
A
Well, there's, there's a couple of things there. Like, I, I want what you're saying to happen. I wonder. The part I wonder about is how many things do people actually want to buy?
- [42:22]
B
Yeah, I, I think they want to buy. That's my, that's my gut based on just, I don't know, people I've talked in, in some bigger companies, I think they want to buy. I think they kind of always want to buy. It helps them wanna, it helps them.
- [42:38]
A
Move faster, like, clearly, I think. And you know, like the, for AI companies, it makes a ton of sense. Right. Like, and for these larger incumbents with big market caps and cash on the books, like, it really makes sense to, to do that. And so that could be a real boon for the tech industry, you know, if, if that happens. But it, it feels like so, it has felt so dry and so restrictive for so long. It's hard to imagine that.
- [43:07]
B
Yeah. Yeah. Again, I think you probably need to see proof that, like, it'll be easier to buy stuff. But I think once that proof has been established, then I would expect the floodgates to open. Personally, I'm not an expert on this. Who knows?
- [43:21]
A
Yeah. I hope you're right. Yeah.
- [43:26]
B
Uh, let's talk One, one thing I wanted to get your opinion on. This is a little less, less focused on AI, just a little more, more broadly tech. But I feel like we're seeing a little bit the return of the emerging gp. Like new funds.
- [43:43]
A
Definitely. Yeah.
- [43:44]
B
New funds started by, you know, GPS of funds, seeing a lot of them. What's going on here? I feel like you're the guy to ask.
- [43:53]
A
Yeah. And you and I have talked about this a little bit before, but not directly like this, and it's actually good timing. It's a complete rebalancing. So the way I explain it is that picture your $20 billion university blue chip endowment. They've been in all these great funds for years, for decades even. And they've supported these franchises across growth funds and opportunity funds and SPVs. And then as a fund scale, their ticket size got bigger and bigger and bigger. And so what's happening now is that all of capital is moving down the stack. All VCs want to invest earlier, all LPs want to invest in smaller funds. It's all following the same pattern. And so they're rebalancing and they're saying, hey, John Smith is leaving. This fund we've been in for three decades. We've had a great relationship with them, but now they're a $3.6 billion fund and they've got a huge team and what kind of return can we really drive? But John Smith is leaving to start with Becky Roberts, this new fund, and it's going to be 225. And we already know that. I'd rather take the 100 million I gave the mega franchise, give them 25, anchor this fund and run with them for a few funds because I have a greater likelihood of return. So that is happening a lot. They want to be in smaller funds. And so basically at Haystack, I've always, maybe to a fault, kept it really, really small and constrained because I've always felt like the best governor on BC behavior is fund size. I think the same thing is happening now with some LPs where they're just like, if I can constrain this group to start at 175 for their first fund, maybe they go to 225 for the next one and 300 for the next one. I ride them for three funds. It's better for me than to be in the mothership at three, ten times the size.
- [45:51]
B
But at the same time, they are also still funding large funds. You know, there have also been a number of these mega funds that have successfully raised over the past year.
- [46:00]
A
So. Well, that comes back.
- [46:01]
B
Seems like a little bit of a difference.
- [46:02]
A
That comes back to the foreign investment, right? Where like, more and more of that capital is coming to the US from different parts of the world. And you have these countries, it coincides with this trend where you have these countries that may have certain types of natural resources that are extremely economically valuable to them, but they need to diversify out. So it's happening at that time, you know.
- [46:27]
B
But are the endowments that would normally invest in the megaphones, are they literally moving their capital or are they.
- [46:34]
A
They have been for years. They have been for years. I mean, they'll stay with.
- [46:38]
B
They're pulling out of the bigger funds.
- [46:40]
A
I mean, increasingly. Wow. Yes.
- [46:44]
B
Interesting.
- [46:46]
A
Yeah.
- [46:47]
B
I also imagine they're probably consolidating towards the winners in that class. Right. Whereas they previously did a bunch. Well, I think now they concentrate that position.
- [46:55]
A
And I think now what they're doing is like, it's mainly focused in the Bay Area. Like my text and phone is off the hook with LPs asking me, Hey, I heard this person's leaving. Hey, can you introduce me to this person? They're leaving. Right. So I become this conduit to all these people. And it's no problem right now for people spinning out of funds, especially brand name funds, to raise 51 million bucks. No problem.
- [47:26]
B
Interesting. Do you expect that'll continue in 25?
- [47:30]
A
Yes.
- [47:32]
B
So, yeah, that was something that was a little surprising to me. Sounds like not at all surprising you. It's been going on.
- [47:37]
A
Yeah. This is a famous, like Fred Wilson line where he said, like, there's always these gaps in venture. So like, you know, you've been now in venture over two years. You see, like the traditional series A funds have scaled to billion, 2 billion, 3 billion plus a 7 on 35A. We could call it a C today. Or it's not as interesting to move that amount of money. Or there's not enough meat on the bone for these larger funds to invest. So who's going to invest that round? It's these people spinning out. So they're, you know, what Fred would say is like, there's a gap. Usually the gap lasts about two years, but people always fill the gap. So right now that gap is open. People are filling that gap. So you'll see a lot of funds saying, we'll do a seed in series A fund. You know, we'll raise 250, 300 million. And if you're an LP that's been held hostage in a 3 to 6 million dollars fund and you feel like that's a burning building writing those new. That new fund. A $30 million check is easy.
- [48:40]
B
Yeah.
- [48:41]
A
Especially if you know that.
- [48:42]
B
Yeah. Super interesting. Okay, let's move on. We. We have a couple other things to get to. One of the things I wanted to talk about is, and this has been in some ways talked about to death on podcast media. No, not Juan Soto. I would love to talk about Juan Soto.
- [49:02]
A
We have to end on that.
- [49:04]
B
Okay. Is it feels like there's a renewed popularity of podcasts.
- [49:11]
A
Oh.
- [49:12]
B
Renewed content.
- [49:13]
A
I feel like it was a podcast year inflection.
- [49:16]
B
Well, so.
- [49:17]
A
Okay.
- [49:18]
B
I think that actually is right. I agree with you. I Think maybe if I could sort of modify my explanation. I actually feel like a few years ago we hit peak podcast and everyone's like, that's it, it's over. We've reached the top of the mountain. And then this year happened, and I feel like we just went further. And now it seems again, I know everyone's talked about the podcast election, but now this almost feels like the true moment of disruption for traditional media as a result of YouTube shows, talk shows on YouTube, podcasts on both YouTube and Spotify. And there's some really cool, like, new and interesting formats coming out. I want to. I'll shout out one in a bit that I think is super interesting. Yeah. What are your thoughts on this?
- [50:12]
A
I mean, I agree with everything, everything you said. Like, I have no notes. Like, it is a juggernaut. I mean, when you combine the ease of background audio and AirPods, when you combine the power of search in YouTube and the algorithm and the recommendation system, they have the fact that, like, you and I can just record a zoom conversation every week and publish it. And like, thousands of people would listen to just shows that, like, people have this idle time and they want to. They want to connect or stalk or listen to different people. The straw that's stirring this drink is YouTube. And if YouTube wasn't in this juggernaut position, I don't know if we'd be saying all this right, because YouTube creates is like the container where everything goes and then everything is kind of clipped and parceled out from there into different networks and brings people in. And so I think that is like, beyond a point of no return and also easier to access even. I'm sure your kids, it's easier for them to search on YouTube and listen to a young creator than to find something on linear tv. They don't even know how to do that.
- [51:36]
B
Yeah, it is super funny when maybe same with your kids. If I'm in a hotel room with my kids and we put on tv, they don't understand the channels. They think it's such a foreign concept. It's really funny, actually.
- [51:53]
A
Yeah. But going back to the podcast thing too, it just doesn't really make sense to me if you think about just a traditional podcast format. David Rubenstein, the co founder, Carlisle, has been doing this great interview series in partnership with Bloomberg, and Bloomberg has its own TV channel. So they obviously have a lot of money and a huge media arm. And Rubenstein is connected to a who's who of politics and finance, so he can interview anybody. And he's trained at This I think it makes sense to create for YouTube and then distribute everywhere else so that he ends up on Bloomberg tv. You're just catching people who are, you know, stuck at the Bloomberg terminal or have Bloomberg TV on the background. But really it's, it's more of like, can you create a direct connection with your audience and have them trust you? Like I, I think Lex Friedman has done one of the best jobs of this where, and I'm sure there are others, but like he's basically trained his audience to be like, hey, if you're anywhere interested in this topic or this person, like this will be a good experience for you. And it's very hard to imagine getting that anywhere else.
- [53:15]
B
One of the things that I have found exciting about it is you're starting to see like these new formats emerge because people realize the distribution that they have. And whereas I think in the beginning people were just sort of all following the same format, now you're starting to see people experiment a bit more. There's a. I think there's like some big. Well, I think there's some big. What's the big comedy podcast you send me clips from sometimes where it's like, it's like a live talk show, there's a bunch of people on stage, it's super popular, I probably should know it.
- [53:46]
A
Tony Inchcliffe.
- [53:47]
B
Oh yeh, Tony Inchcliff. Like that's like, that's a new format I think.
- [53:50]
A
Kill Tony, Kill Tony.
- [53:53]
B
The one that I've been really excited about is this thing Technology Brothers. Have you seen this?
- [53:59]
A
No. You need to send me the clips. I didn't know what it was.
- [54:02]
B
I think it's super smart. It's Jordy Hayes, John Coogan and yeah, basically. So it's a traditional long form podcast. They publish I think a long episode to Spotify, YouTube, wherever. But where I see it and where I expect most of the people who see it see it is just in clips on Twitter. And all of the clips are built around reactions to tweets.
- [54:30]
A
Oh sure.
- [54:30]
B
So all it is is sweet reactions, which is genius because it's just like a never ending supply of content inspiration. Like they'll never run out of stuff to talk about, right?
- [54:42]
A
Yeah.
- [54:43]
B
And secondly, every time they do a clip there's like this built in growth mechanic where they tag the tweet, tag the person they're talking about, right?
- [54:52]
A
Yes.
- [54:52]
B
And people are excited to be like featured on the show. Right.
- [54:56]
A
This. I always remember this line from Keith Raboy when Quora came out and people were wondering like, why is Quora Interesting. And he said, it's like he's like, facts aren't interesting. It's a judgment on top of facts. So if you think about it, the judgment layer on top of a tweet, like the tweet is a fact, that person tweeted it. But like the reaction or the judgment of it is actually what people are most interested in. It's probably why you and I and other friends, we share links to tweets in our private chats. Right. Because the judgment and conversation from it and proof of the public thing. I also think that format reminds me of like something on TikTok and Instagram where you see people do these reaction videos where they'll transpose their face on top of the content as a reaction. So I do think people like reactions. Maybe that's the comment of the comment section of a podcast. Right. Where it becomes more interesting than the original content itself or like the remix of it.
- [55:56]
B
Yeah, I, I, I think you're gonna see a lot more people doing this on podcasts specifically. I think you're totally right about TikTok and, and Instagram, like, but I think we're gonna see this more in podcast form. I wouldn't be surprised if there were a bunch of podcasts people talking about tweets over the next year.
- [56:13]
A
Yeah, it's free content.
- [56:15]
B
It's free content also, you know, it's the first time, obviously. Podcasts in general, I feel like for a while have been sort of optimized for clips and social sharing. But this is the first one where I feel like.
- [56:29]
A
Actually the first class.
- [56:30]
B
Form, the first class citizen in terms of the format for this show is, is Twitter, like, is the clips. It's not the long form. I've actually never even listened to the long form of the show. I only see the clips and I look forward to the clips also. These guys are just good, they have like a, they just like a good aesthetic sense of humor.
- [56:50]
A
Is it like snark or is it like it's snark.
- [56:53]
B
But it's also like I get a sense of self deprecation. Like they're aware that they're being very kind of on the nose. Like the show is called Technology Brothers. Right? Tech Bros. Tech. So yeah, it's self aware, I think is the point. So that, that's been a fun one for me.
- [57:11]
A
Yeah, no, I've always wondered about that too. Like, you know, is it better to just do your clips as like short form pieces or is it better to like record a bunch and then Clip out the good parts. You know, I, I don't really know. I tend to be more of like the, the purist of like you have a conversation, people listen to the whole conversation. But like, yeah, we live in a clip culture.
- [57:35]
B
Yeah, yeah, exactly. They're leaning into that.
- [57:37]
A
We got a few minutes.
- [57:38]
B
One Soto, Juan Soto. I mean, this will be irrelevant to.
- [57:42]
A
Congratulations.
- [57:43]
B
Thank you. Yeah, it's one of the few times in my life I feel proud to be a Mets fan. This will be irrelevant to 99% of the listeners, but yeah, I mean, that was a big moment. Actually. This is a technology moment and I'll explain why. So if you are a Mets fan or a Yankees fan or a baseball fan, you were aware that this Juan Soto free agent signing was the biggest moment of the off season. And I have never seen so many baseball fans just be constantly refreshing Twitter to find out the news. You know, people were glued to Twitter on this like it was the election. It was crazy. And, you know, I was doing this, but I also know a bunch of other people doing this, just constantly searching for any hint or insight about where he might go. Is he gonna go to the Yankees? Is he gonna go to the Mets? You saw, you saw poly market screenshots being, being blasted across Twitter constantly. It was actually, it actually was a tech moment. It was pretty fascinating.
- [58:44]
A
I, I just don't think we'll see in baseball a free agent signing like that. I mean, for a generation. Why not longer? I don't think. Well, one, he, he's, by all accounts, he's rejected two to potentially three long term offers, over 400 million by the time he turned. Yeah, he had done this before he turned 26. So he was waiting and waiting and waiting and betting on himself till he had true free agency. Right. So most people would take the bird in hand. I think the second thing is that you had this bidding war where you have now private equity or hedge fund types like Guggenheim with the Dodgers and Cohen with the Mets, where their pockets run so deep that someone was telling me a lot of these franchises, most of them lose money and some of them make a couple hundred million dollars a year after expenses and operational expenses and things like that. So when you can dip into your separate bank account and take on more losses to build up a franchise, like, it's just very. His timing is amazing where you have these people compete for them and then if you look at it statistically, he's already got eight years of experience basically in the major leagues, already win the two World Series, 1, 1 and his offensive numbers compared to like most people now just, just over a block of time basically blows everybody out of the water. That all. But all that being said, I think it was a crazy deal. Like, I don't think I would have done that deal because baseball to me is more of a team sport. One player doesn't make it. And I think you. He's not a great defensive player or maybe it could be. It just doesn't try. Who knows? And so to me, baseball is one of these sports where like these mega deals don't really make sense, but they never have.
- [60:58]
B
Like, this one doesn't. But, you know, neither did judges. Neither. Neither did Pujols. The pujols deal from 10 years ago or whatever. Like, they haven't made sense in a long time.
- [61:10]
A
Yeah, I just, I just wouldn't do them. I would invest in younger players, shorter contracts and, and yes, like, maybe you splurge on a star here or there and like, I, I just think you're paying him for like five to seven years of service.
- [61:27]
B
Yeah, yeah, totally. 100.
- [61:30]
A
And like, we really don't have any leverage over his performance.
- [61:34]
B
There's a great interview with Steve Cohen. I think it was done a while ago. I would, I would. If anyone's interested in what we're talking about right now, I would encourage you to check it out. And Samil, I would definitely encourage you to check it out. Where he gets interviewed about his motivations for owning the Mets and buying the Mets and how he thinks about spending. And he admits in the podcast that he views it as a form of charity. It is a public service to.
- [61:59]
A
Which is great. Which is great. Which is great. And I mean if he's got that passion and like it's a market and he wanted the asset and like, let's go. I also think Juan Soto, like may not recognize like the scrutiny on him to perform will be.
- [62:15]
B
Oh, it'll be extreme. Yeah. And he'll be down years. But when he's having his up years, he will be treated like a king.
- [62:24]
A
Oh, yeah, yeah.
- [62:25]
B
Just look at, look at Francisco Lindor over the past year. I mean, that guy is now an all time great met because of one season.
- [62:34]
A
It's exciting. I mean, I think, I think it is a seismic event in New York baseball for sure.
- [62:41]
B
All right, sir.
- [62:43]
A
Always fun. Happy holidays.
- [62:44]
B
Happy holidays. We'll do this again in a few months.
- [62:47]
A
All right, sir. Take care.
- [62:51]
B
Thank you so much for listening to Generative. Now if you liked what you heard, please do us a favor and rate and review the podcast on Spotify and YouTube and Apple Podcasts. That really does help. And of course subscribe. That is also very helpful if you want to know when we drop new episodes. If you want to learn more, follow lightspeed at LightSpeed VP on YouTube X or LinkedIn. Generative now is produced by LightSpeed in partnership with Pod People. I am Michael McNano and we will be back in 2025 with new episodes. See you.