E405: Why AI Has Made Venture Capital Harder (Not Easier)

Summary

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Podcast Summary: How I Invest with David Weisburd

Episode: E405: Why AI Has Made Venture Capital Harder (Not Easier)
Date: July 20, 2026
Guests: Michael Gilroy (Co-Founder, Marathon Management Partners), Gokul
Host: David Weisburd

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Overview

In this episode, David Weisburd explores how AI is reshaping the landscape of venture capital, not by making it easier as some expect, but by presenting new complexities and challenges. Michael Gilroy, co-founder of Marathon Management Partners, joins alongside Gokul to dissect the current VC environment, the impact of AI on company creation and competition, evolving investor diligence, the qualities VCs now look for in founders, business model underwriting, and what makes their approach unique in an increasingly consensus-driven market.

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Key Discussion Points & Insights

1. How AI is Changing Venture Capital

• Explosion of Startups & Lower Barriers

  • "Barriers to entry are essentially gone. Gone, completely gone. You have an idea, you can spin up the product overnight." — Michael Gilroy (01:25)
  • AI, cloud, and abundant tools have made founding a company fast and cheap, bringing 20+ companies into every emerging trend versus a few in the past.

• Talent Dispersal from Tech Giants

  • "We have Google, Facebook, Amazon, and the new crop of large businesses... spitting off this talent at a record pace." — Michael Gilroy (00:55)
  • Tech company alumni are founding companies at unprecedented rates.

• FOMO-Driven Capital and Revenue Instability

  • "It's absolutely related... the buying behavior has changed dramatically here." — Michael Gilroy (02:23)
  • Companies can go from $0 to $10M in revenue and back to zero due to FOMO-driven purchasing by customers.

• Market Saturation & Picking Winners

  • "Instead of two to three companies in every trend, we have 20. This makes picking early extraordinarily difficult..." — Michael Gilroy (01:09)

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2. Investor Diligence in the AI Era

• The Human Edge in Diligence

  • "You lose so much by reading a transcript. One, there's zero edge. If all my competitors are reading the same transcript, who cares?" — Michael Gilroy (04:07)
  • Real human conversations with buyers are essential—details such as hesitation and candor get lost in transcripts.

• Customer Engagement & Revenue Stickiness

  • "Revenue quality is much, much lower if somebody's buying it out of fear instead of out of need." — Michael Gilroy (02:53)

• Deep, Backchannel Diligence

  • Now speaking directly (and extensively) to customers to probe true usage, integration, decision rationale, and alternatives considered.
  • "We need to talk to five of these front door. And then we're gonna just pound our networks and get 15 plus customer calls on the back channel..." — Michael Gilroy (03:37)

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3. What Makes a Good AI Investment Today

• Moving Beyond Team as Table Stakes

  • "Today we don't even talk about team because for us that's a given. You only want to invest in founders that have an obsession with their end market..." — Michael Gilroy (05:13)

• Three Pillars for Evaluation

  • Trend: Is it here to stay? Will it have tailwinds?
  • TAM (Total Addressable Market): Is it big enough to matter? Could capturing even a slice return the fund?
  • Business Model: Will it capture premium multiples, and does it compound at scale?

• Market Sizing in New Categories

  • Use 'market cap' of public incumbents as a proxy, but also dissect legacy workflows and revenue pools in new markets.
  • "We take it a step further and we say, hey, okay, what does accounting actually mean, right? Is it audit, is it tax...?" — Michael Gilroy (07:53)

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4. Valuation: Gross Profit vs. ARR

• Focus on Gross Profit, Not Just Revenue

  • "In fintech we only use gross profit multiples... today as we're looking at software this is now the same thing as it was historically in Fintech." — Michael Gilroy (10:59)
  • Different AI and fintech companies have vastly different gross margin profiles, so valuation must focus on unit economics, not just top-line.

• Capital 'Savers' vs. 'Incinerators'

  • "We segment the world today... as AI capital incinerators and AI capital savers..." — Michael Gilroy (12:33)
  • The best AI companies are achieving high efficiency, but FOMO is funding many with wasteful early-stage burn.

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5. Horizontal vs. Vertical AI and Building Moats

• Horizontal AI: Scale, but Susceptible to Lab Disruption

  • "Labs are going to come out and disrupt many of these horizontal solutions..." — Michael Gilroy (17:40)

• Vertical AI: Deep Integration and Defensibility

  • Tightly solving nuanced, industry-specific problems can hinder disruption by large AI labs.
  • Examples: Toast vs. Block — Toast succeeds because restaurants' needs are complex and idiosyncratic.
  • "Very, very large end market, very, very specialized set of needs." — Michael Gilroy (19:12)

• Why Human-Driven Diligence Still Wins

  • "You cannot replicate knowing the customer without making 10, 20, 50 calls over the course of looking at a trend..." — Michael Gilroy (19:22)

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6. Competition, Consensus, and 'Right to Win'

• VC Has Become More Consensus-Driven

  • "Ventures becoming extremely consensus..." — Host (21:42)
  • Giant firms increasingly pour capital into perceived winners, amplifying network effects and lock-in.

• Surviving Against Platforms: Focus, Depth, and Diligence

  • "What is an edge is years and years of experience... complete and total dedication to an investment process..." — Michael Gilroy (23:00)
  • Marathon only does 2–3 deals a year so partners can go deep—every partner involved, full resources, pre-portfolio work.

• Providing Real Value — Pre-Investment

  • Bringing customers and value before investing to build strong rapport—so much so that "if we do... in our pre portfolio and A round comes up and we don't get allocation... we want it to feel like a breakup..." — Michael Gilroy (27:57)

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7. Firm Building and Internal Culture

• Rigor, Ownership, and Human Focus

  • All team members do "real work" regardless of title, to ensure decisions are grounded and informed (32:22).
  • "There's no work that's below us. And we love the work behind the scenes because that's what makes you great." — Michael Gilroy (32:22)

• Relationship Management, Concentration, and the Dunbar Number

  • Emphasis on keeping the team and portfolio intentionally small to build deep, enduring relationships—"There's a certain amount of people who are going to make that 150 and we're going to work really hard for them." — Michael Gilroy (34:30)

• Recruiting with Focus on Character

  • Michael spends months getting to know new partners on a personal level, looking for humility, diligence, and alignment of values (42:36).

• Cultural Principles: EQ, IQ, and RQ (Rationality)

  • "We have a marathon university culture deck and... we actually say EQ, IQ, and RQ..." — Michael Gilroy (48:09)
  • Open, honest debate and admission of error are built into the firm.

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8. Working with LPs and Co-Investment Innovation

• Building Trust and True Partnership

  • "They're your true partners... I will go to war for these people." — Michael Gilroy (60:24)
  • Marathon keeps LPs closely informed with monthly, highly transparent updates.

• Innovative Co-Invest Fee Structure

  • LPs pay higher carry (up to 12.5%) only if Marathon beats its underwriting model—aligning incentives and building conviction (67:32).
  • "We said we are going to charge a 07 and a half or 012 and a half. If we beat our underwrite and our model by X percent, it's the same for all of it. We get kicked up to the 12.5%" — Michael Gilroy (67:32)

• True Early-Stage Focus, But Opportunistic

  • "Our box, to be really clear, is Early Stage Venture Capital. But our first company was a pre IPO deal..." — Michael Gilroy (59:28)
  • Marathon wants to own as much as possible and doesn't chase deals just for stage allocation.

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9. Modeling and the Art of Diligence

• Financial Rigor, Even at Early Stages

  • Even pre-seed/Series A investments are modeled as though they’re public companies—understanding margin structure, operating leverage, and sensitivity matters more than precision.
  • "The only thing I can tell you about the model is it’s definitely wrong... Now what is absolutely accurate is whatever we're assuming the exit multiple is, we're going to have operating leverage within sniffing distance of what it should be..." — Michael Gilroy (69:53)

• Key Metrics: Net Dollar Retention (NDR) as a Guide

  • NDR reflects real product love and expansion within a customer base; simply benchmarking is naive—true understanding comes from digging into the why behind the number (73:42).

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10. Notable Quotes & Memorable Moments

• On AI Changing VC:
  • "If the four of us in this room had an idea, right now, we can be outselling it in probably a week from now." — Gokul (01:29)
• On Company Building Today:
  • "Company building is very different... a different level of poise in a founder because every day we're waking up and there's some massive round, there's a new product launch that are rendering some businesses obsolete overnight." — Michael Gilroy (16:13)
• On Pre-Investment Value:
  • "We came in and just hit our network so hard and brought tens of customers to them out of the gate. And the founder called us one day and he's just like, I've never seen or heard of anything like this." — Michael Gilroy (25:48)
• On Transparency to LPs:
  • "We've been told over and over by our largest investors that we are the most transparent firm in their entire portfolio ever." — Michael Gilroy (62:28)
• On Failure and Resilience:
  • "I'm most grateful for all the things that I wish had not happened to me." — Michael Gilroy (76:53)
• On Winning:
  • "Winning, I would also say, is not how it's defined outside there. It's internal and it's knowing that you've done the things you said you were going to do for yourself." — Michael Gilroy (78:57)

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Timestamps of Important Segments

• AI's Impact on Company Formation and Venture (00:14–02:03)
• FOMO Revenue & Dilution of Signal (02:15–03:10)
• Customer Diligence and Revenue Quality (03:24–04:39)
• Three-Pillar Investment Framework (Trend, TAM, Business Model) (05:13–06:13)
• Gross Profit vs. ARR for Valuation (10:02–11:24)
• Capital 'Savers' vs. 'Incinerators' in AI (12:33–14:14)
• Vertical vs. Horizontal AI Strategies (17:03–20:04)
• Deep Work and Winning the Right to Win (23:00–25:42)
• Concentrated, Relationship-Centric Approach (32:22–34:30)
• Firm Culture: Debate, Openness, and No Ego (48:09–51:40)
• LP Partnerships, Transparency, and Co-Invest Program (60:04–68:49)
• Modeling and Importance of NDR (73:17–75:42)
• Lessons on Resilience and Winning (76:50–78:57)

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Conclusion

This wide-ranging conversation reveals why AI's acceleration of company formation has paradoxically made early-stage investing both more challenging and more exciting. With a crowded market and easier company creation, superior diligence, relentless focus, and deep founder and LP relationships are now non-negotiable. The Marathon team exemplifies a high-rigor, low-ego, high-touch approach in an industry increasingly defined by platforms and consensus. Their insistence on model-driven investment, process-driven culture, and true partnership with founders and LPs sets them apart in the race to find, back, and build generational companies in the AI era.

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Transcript

[Host]

AI has made it easier than ever

[Narrator/Announcer]

to start a company. But according to today's guests, that might

[Host]

be making venture capital harder, not easier. Michael Gilroy is a co founder of Marathon Management Partners, which has $400 million

[Narrator/Announcer]

across software and fintech.

[Host]

Michael, your view is that AI has changed venture capital fundamentally. What has AI changed exactly?

[Michael Gilroy]

AI is very exciting.

[Gokul]

Everything we're looking at today is AI related or AI adjacent in some capacity.

[Michael Gilroy]

We like to take a macro lens

[Gokul]

on everything that we do.

[Michael Gilroy]

A few things are happening on the company building side. One, we have more infrastructure than ever before.

[Gokul]

You kind of look at the last 10 years.

[Michael Gilroy]

What did it take to start a company right? And there's all this tooling now across general infrastructure.

[Gokul]

We go back to even the Twilio era of messaging. And then today in AI you can stand up a company really overnight. The second component to starting a company are IPO potential style founders. So we have Google, Facebook, Amazon, and then the new crop of large businesses, OpenAI, Anthropic, et cetera, et cetera, spitting off this talent at a record pace. And so what does this mean for seed and pre seed investors?

[Michael Gilroy]

We have instead of two to three companies in every trend, we have 20.

[Gokul]

And so this makes picking early extraordinarily

[Michael Gilroy]

difficult, but also short a lot more

[Gokul]

exciting pick, particularly when we're seeing companies go public in the north of a trillion dollar market cap range.

[Host]

Barriers to entry are essentially gone.

[Michael Gilroy]

Gone, completely gone. You have an idea, you can spin up the product overnight.

[Gokul]

We have a joke internally, especially when we're talking to IPs and we're talking about this exact phenomena. If even in this room, if the four of us in this room had an idea, right now, we can be outselling it in probably a week from now. That's both exciting. And then as an investor requires a different level and focus on diligence.

[Host]

And also at least today, the capitals are also abundant.

[Gokul]

Capital is extraordinarily abundant. And so you go back and you look at the last huge technology shift. In 1999 there was a lot less capital, much harder to start a company. And then today we have both of those things.

[Host]

So the four of us sitting in the studio, we could start a company over the weekend and then by Wednesday have a term sheet.

[Michael Gilroy]

One of these platforms out there managing

[Gokul]

100 billion of dollars will definitely give us a term sheet or two.

[Host]

You've also said that companies today could go from zero to $10 million in revenue and then back to zero. Is that somehow related?

[Michael Gilroy]

It's absolutely related. And What I would say is the buying behavior has changed dramatically here.

[Gokul]

Right.

[Michael Gilroy]

Let's take security for example.

[Gokul]

We're actually just announcing a big security series A today.

[Michael Gilroy]

And you go and you talk to the buyers. For many of these companies, as we

[Gokul]

were looking at this trend for the last 12 to 18 months, you go

[Michael Gilroy]

and actually get on the phone with

[Gokul]

the buyer and they're buying it out of fear. Right. And so it's FOMO driven buying the same way we have this as investors,

[Michael Gilroy]

people do not want to be left behind.

[Gokul]

So what does that mean for revenue quality?

[Michael Gilroy]

Revenue quality is much, much lower if somebody's buying it out of fear instead of out of need. And so it's up to us as the investor to spend the adequate time

[Gokul]

to go in and say, hey, is

[Michael Gilroy]

this a product that is going to be sticky within the organization for years

[Gokul]

and years from now or, or in

[Michael Gilroy]

six months are we going to see this hit the cohorts in a really

[Gokul]

negative way because they just wanted to go out and test and see it and they actually bought all 20 solutions in whatever subsector it was.

[Host]

How do you know as an investor whether a company is purchasing software in order to test it versus actually are very interested in it?

[Michael Gilroy]

Good old fashioned hard work and back channels. Historically I would go out and look at a trend, particularly in software and say, hey Mrs. CEO, can you introduce us to your three largest customers?

[Gokul]

And then I'm going to go and do two or three more back channels.

[Michael Gilroy]

Today it's hey, we need to talk to five of these front door. And then we're gonna just pound our

[Gokul]

Networks and get 15 plus customer calls on the back channel and say, hey, why did you buy this?

[Michael Gilroy]

Who was involved in the purchasing process? How many other existing software solutions inside

[Gokul]

of your organization are you integrating this with?

[Michael Gilroy]

And really going that extra mile right

[Gokul]

in AI right now we have a lot of investors that are going on

[Michael Gilroy]

and saying, hey, we have transcripts from customer calls that are readily available.

[Gokul]

So that means every investor is reading the same transcript.

[Michael Gilroy]

And you lose so much by reading a transcript. One, there's zero edge. If all my competitors are reading the

[Gokul]

same transcript, who cares? What am I going to learn from that? That's differentiated from the market.

[Michael Gilroy]

Now if I get on the phone or on a zoom or in person

[Gokul]

with a customer, I'm going to know when they pause, when I ask a question, you and I sitting here looking, you will know if I'm lying, if my eyes are darting around the room. The classic touching your nose so you

[Michael Gilroy]

need to have that human component of this job. And I think it's very good to lean into AI as a firm.

[Gokul]

It's a huge part of what we do every day.

[Michael Gilroy]

But we're also leaning into the human

[Gokul]

component of the business, which is very, very important, especially at the early stage.

[Host]

And today it's even more important because before revenue itself was this signal.

[Gokul]

Exactly right, exactly right.

[Michael Gilroy]

What is AI actually solving in the business? And then also there are a lot of AI companies being funded that don't really serve a long term purpose for the business. And it's both being invested in and

[Gokul]

bought out of FOMO and not being left behind here.

[Host]

So if AI has really changed the nature of early stage companies, how does a venture capitalist invest?

[Michael Gilroy]

Today we don't even talk about team because for us that's a given. You only want to invest in founders that have an obsession with their end

[Gokul]

market and what they're building.

[Michael Gilroy]

There's three core pillars.

[Gokul]

Trend, TAM and business model. We start with trends.

[Michael Gilroy]

So if you come into our Slack

[Gokul]

instance, we're talking about trends all the time. At any given time we're looking at 10 different trends.

[Michael Gilroy]

We're posting research, we're posting different company notes. We're really trying to understand the depth of it. And hey, is this a trend that's

[Gokul]

going to stick around for a long time?

[Michael Gilroy]

Yes or no? Okay, great.

[Gokul]

Trend is fantastic. We're going to have a little bit of wind behind ourselves as we're building the business.

[Michael Gilroy]

Now, how big is the market?

[Gokul]

Do we need to go and capture 10% of this market to return the fund?

[Michael Gilroy]

Or can it be 50 basis points which is the best possible outcome there? And then lastly is business model right? We want a company that's going to

[Gokul]

trade at a premium to NASDAQ multiples

[Michael Gilroy]

and at scale and at maturity when

[Gokul]

they're starting to compound.

[Michael Gilroy]

Because we want to get paid. If we're right and we get to

[Gokul]

a company with billions of revenue, we

[Michael Gilroy]

want to get paid on that.

[Gokul]

We don't want something to go out and trade at one times revs because it's a terrible business model.

[Michael Gilroy]

And so, and obviously things change over time. But our view, particularly at the early stage, if you solve for all of those things, they're going to have growth

[Gokul]

capital readily available to them and they're going to have public market capital also readily available to them. So that's kind of the way we think about the world.

[Host]

Oftentimes you're investing at the seed stage or sometimes series A stage. How do you go about Sizing a

[Michael Gilroy]

market today, what I would say is, and this comes out of my experience working at one of the largest and

[Gokul]

best hedge funds in the history of

[Michael Gilroy]

the world, we like to think about market size first in terms of market cap, right?

[Gokul]

We're obviously seeing today in AI there

[Michael Gilroy]

are a lot of new markets being created, although I would argue you look at something like any of the big labs. This has existed under a different name and a different product style, but these markets have existed for a long time.

[Gokul]

So if I'm underwriting Anthropic today at

[Michael Gilroy]

the seed, I'm going and looking at

[Gokul]

Google and Amazon, so on and so forth.

[Michael Gilroy]

Now we start with market cap. There are going to be many cases

[Gokul]

where market cap doesn't exist because we have this new technology, just like we saw with the Internet.

[Michael Gilroy]

And then we have to be really thoughtful about exactly what it is they're doing, right? So I'll talk about the AI ification of services businesses, what lawyers, accounting firms,

[Gokul]

so on and so forth.

[Michael Gilroy]

I was talking to a good friend

[Gokul]

at a tier one firm that everybody in this room would know extraordinarily well,

[Michael Gilroy]

and I said, hey, how are you thinking about market size for this business?

[Gokul]

And it happened to be in the AI for accounting trend.

[Michael Gilroy]

And they said, we look at the total number of accountants and their salaries

[Gokul]

all over the world and that's your tam. And look, you may end up being right in situations like that, but we

[Michael Gilroy]

take it a step further and we

[Gokul]

say, hey, okay, what does accounting actually mean, right? Is it audit, is it tax, is it, you know, opening and closing books?

[Michael Gilroy]

What exactly is it? And then let's go out there and then look at the end of the people there and the efficiencies there back into an acv. And so we're just taking four or

[Gokul]

five or six different cuts and layers

[Michael Gilroy]

to this TAM so that we don't end up in an end market where maybe that's a huge number. And a different example from in accounting,

[Gokul]

if they're selling into manufacturing or something like that, it's a very top heavy industry. So the market's very big. But if I don't get the top five customers, who cares? The long tail is very small.

[Michael Gilroy]

I don't want to be in a

[Gokul]

business, particularly at the early stage, where if we find out by series B the top five customers either don't want it or they're going to build it themselves, then the TAMs are really small, right? And so it's really understanding the layers

[Michael Gilroy]

and detail of that underlying TAM and

[Gokul]

Making sure we can capture enough to

[Host]

return the fund TAM has been one of the most difficult things for venture capitalists to underwrite. Famously, Uber wanted to disrupt something like 25% of the taxi market and they ended up beating it by an order of magnitude of 10. How do you differentiate business models that will grow as the technology is introduced versus ones that are instead?

[Michael Gilroy]

This is similar to the anthropic example

[Gokul]

that it ends just gave, right?

[Michael Gilroy]

You could have looked at Oracle. There's so many companies that were doing something very similar and I think the best investors can discern that, right? So I look at Uber and hopefully we would look at that today and say, well, do people take taxis in every city every day? Do people enjoy driving in these short

[Gokul]

routes across Manhattan or anywhere? Right?

[Michael Gilroy]

And you can say, well, it's a combination of taxi services, black car services,

[Gokul]

potentially some Metro or public transportation, and then our own transportation. Right?

[Michael Gilroy]

That would be the way to nail that and to see it in a

[Gokul]

different way than other investors did at the Series A.

[Michael Gilroy]

So I don't actually view that as

[Gokul]

this brand new TAM creation with Uber necessarily. I think if you really took a step back and looked at it, you

[Michael Gilroy]

could get there even at the seat.

[Host]

You oftentimes value companies at the gross profit level versus the ARR level. Why do you do that so early?

[Gokul]

One of my favorite topics right now.

[Michael Gilroy]

So let's think about if we were sitting in a business school class right

[Gokul]

now, which was a very long time

[Michael Gilroy]

ago, where did revenue multiples come from and why do we use them? We look at revenue because gross profit was virtually the same across most SaaS businesses, right? Let's put it in a band of 65 to 80%. But the mental model was at scale and maturity, this company's going to get to 80% gross profit.

[Gokul]

We take out all the cogs, which I think we know well.

[Michael Gilroy]

And then I come from the world of fintech and payments. As you look across fintech, there's so many different business models out there. In fact, if you look at the multiple variants in the public markets, the

[Gokul]

variance of financial services from a multiple standpoint is larger than any variance across any other sector.

[Michael Gilroy]

So healthcare, Internet, consumer software, and so in fintech we only use gross profit

[Gokul]

multiples because I can be looking at a business that's 70% gross profit or 10%. It doesn't mean the 10% gross profit business is any worse, but it does mean they're different. So taking revenue multiple there makes zero

[Michael Gilroy]

sense today as we're looking at software this is now the same thing as

[Gokul]

it was historically in Fintech. Right.

[Michael Gilroy]

I can be looking at a company

[Gokul]

that's at, by the way, negative 10 gross profit, which we'll probably stay away

[Michael Gilroy]

from all the way up to 70,

[Gokul]

80 for the folks that have a business model that lends itself to that.

[Michael Gilroy]

From there, why are we using multiple A or anything above earnings multiples to begin with? Many of these companies aren't earning it. And so it's my job particularly at the early stage to say hey, today we're at call it 50% gross profit or 80 for both of those companies I'm going to say what is the net income conversion off of that gross profit? So what does it cost to run gna?

[Gokul]

What does it cost to sell this product?

[Michael Gilroy]

And then at scale when this thing is compounding, what do I feel like steady state and maturity earnings potential is for this company? If they go public at some point in time they will trade on earnings. And obviously market dependent. That is the fundamental issue or mistake I think many people are making across the industry today. And again I've been very blessed to have a range of experiences from Kanin,

[Gokul]

which is a traditional early stage firm, and then CO2 which is a multi product large platform but started as a hedge fund.

[Host]

If you had to distill some of the factors behind one, why some of these AI software companies have more gross profit in the long term than others. What are some of those factors?

[Michael Gilroy]

We segment the world today in our letters to LPs as AI capital incinerators and AI capital savers. There's two crops of companies and some of it is founder driven and some of it is business model or end market driven. And one of our companies in the portfolio, they spent two years using all the latest AI tools to build a product suite that they felt like they can go out and sell against the incumbents with. They needed to get to feature parity, but they just put their head down

[Gokul]

for two years and built.

[Michael Gilroy]

And so when we first got the model, I'll never forget this model review, it was a series A model and there were five different contributors to revenue and they were actually running truly at almost 80% gross profit. So one of my best friends and

[Gokul]

partners, Chase Packard, he was running the

[Michael Gilroy]

model review and the investment in the company and I just said Chase, like what are we doing here? There's zero chance this is an 80% gross profit business. Like something is hidden. It's our job.

[Gokul]

The number of PNLs that I get that say 80%, they're really 30 or 40 thousands of companies.

[Michael Gilroy]

And then we actually went through it and he explained to me, hey, these

[Gokul]

are very mature founders.

[Michael Gilroy]

They did everything they could to make sure they were capital efficient. We ended up doing that series a year and a half ago. They've burned like 5% of that capital

[Gokul]

and just raised another round on top of that because of the efficiency.

[Michael Gilroy]

Now there are other business models and maybe founders who are using this moment

[Gokul]

in time because capital is abundant to

[Michael Gilroy]

say inference costs are going to go down.

[Gokul]

Everything is going to go down. Reminds me a lot of crypto, by the way, back in Zirpin.

[Michael Gilroy]

And so this is going to be capital consumptive early. And then we have this big inflection

[Gokul]

point in five years from now.

[Michael Gilroy]

That story is one that will be

[Gokul]

very hard to trick us on. And that just comes from a lot of experience and investing and frankly, scars.

[Host]

And the only way that really works is if there's true economies of scale, like giant economies of scale and really network effects.

[Michael Gilroy]

And by the way, they do exist. Some of my best investments started at

[Gokul]

negative gross profit at the A or the B. Right.

[Michael Gilroy]

And now you have to know that market cold.

[Gokul]

I'll take Fintech again for an example because I think there are a lot of parallels with FinTech and AI right now.

[Michael Gilroy]

I knew that there's a company called

[Gokul]

Cloudwalk, it's a Shopify of Brazil, when

[Michael Gilroy]

I first invested there at negative 5 million gross profit run rate. But I knew that at scale, the networks were going to give them breaks

[Gokul]

on their fees, so network costs were going to come down.

[Michael Gilroy]

I knew that they were early in

[Gokul]

building their fraud risk and compliance machine. So that was going to come down.

[Michael Gilroy]

And so I can go through every single last cogs. And because I've been in the market for so long, I knew that we were going to get a lot of

[Gokul]

inflection there over time. And today it's, you know, doing 300 million of net income. And thankfully this has come true.

[Michael Gilroy]

And so this is still true in AI.

[Gokul]

So it's not to say I don't want to invest in a negative 10% software business that's leveraging AI.

[Michael Gilroy]

It's. I really need to understand it and

[Gokul]

understand which camp this founder is in. And this is where the additional layer of diligence comes in.

[Narrator/Announcer]

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[Host]

What are you looking for that's different in founders today?

[Michael Gilroy]

In a post AI world, company building is very different.

[Gokul]

Right?

[Michael Gilroy]

There's the pace of innovation and the pace internally. It's necessitates, I think, a different level of poise in a founder because every day we're waking up and there's some massive round, there's a new product launch

[Gokul]

that are rendering some businesses obsolete overnight.

[Michael Gilroy]

And so we really are spiking on potentially second time founders, but mostly mature founders, feet on the ground that are going to run their own race and

[Gokul]

not be distracted by tech. Twitter, which is a really dark place,

[Michael Gilroy]

really focus on the team because ultimately the famous trope build a good team, build a good business and I believe that to be true today, but it really does require a certain level of poise and operating rigor.

[Host]

Speaking of this constant disruption, what's your view on vertical AI versus horizontal AI? In other words, which vertical AI companies will be disrupted by the Anthropics and Open AIs of the world?

[Michael Gilroy]

The million dollar question right now, I don't view horizontal versus vertical much differently than I did before. Right. What we love about vertical is you are building custom but for a, hopefully a very large vertical set of solutions that it would take either one of the labs or one of the large

[Gokul]

incumbents a long time to really focus on and build a team around and offer into the market.

[Michael Gilroy]

And so they are going, the labs are going to come out and disrupt many of these horizontal solutions. Just like historically in our business, people will say, well what about Oracle, what about Salesforce? And so on and so forth. And so you really need to build something special and have that maniacal focus on the customer experience and product. To build something that is going to require an immense amount of attention to detail. Where one of the labs look at it and they say, you know what, we're either gonna buy this or let's just keep it horizontal. And we'll pick off, you know, the

[Gokul]

long tail of revenue Coming out of this market.

[Host]

What are some of those moats?

[Michael Gilroy]

Some of those moats are features. Let's talk about Toast, for example. Famously, there's been a lot of chatter between Block and Toast, with Block really

[Gokul]

building the horizontal software suite for SMBs and maybe lower middle market. And Toast said, hey, restaurants are complex

[Michael Gilroy]

enough where we feel like we can build a really big business, really just focused on that, right? And so you go into a restaurant and you say, well, what's going on here?

[Gokul]

We have servers which require a certain type of scheduling and time cards. We're buying stuff for the restaurant, food, beverages, so on and so forth.

[Michael Gilroy]

Let's build a network of procurement, of

[Gokul]

procurement on the back end.

[Michael Gilroy]

Let's fully integrate payments into the experience. And not just the server handing you a check at the end of the meal. Let's give the person that's dining the ability to pay it directly on their phone. And so there's just a lot of nuance to a market that's very big. If we walked outside here in New

[Gokul]

York, there's, you know, restaurants everywhere, very,

[Michael Gilroy]

very large end market, very, very specialized set of needs. And so if we sat here today and said, hey, which one of these

[Gokul]

is anthropic most likely to disrupt?

[Michael Gilroy]

I think you'd probably say block before Toast, right? Again, just because of the horizontal nature of it. So it requires a lot of work and customer calls. You cannot replicate knowing the customer without making 10, 20, 50 calls over the course of looking at a trend and deciding to make an investment there.

[Host]

So another way, it's inherently not scalable to invest in these kind of companies, because the things that make them special in a specific vertical are one of one, are idiosyncratic versus if everything. You could have this checklist of these three, four items. You could have an AI analyst go in and figure out exactly which companies to invest in.

[Michael Gilroy]

That's exactly right. And again, we are using AI all throughout our business, but we are really leaning into the human component of it. We do two to three deals a year, and this is really why we started the firm, because we want to spend a lot of time prosecuting on an idea and making sure we are prepared, and that's how we win.

[Host]

Speaking of these two to three opportunities that you guys invest in in a given year, how do you go about mapping the opportunity set and identifying that

[Michael Gilroy]

part of our business is unchanged, other than the fact that AI has been phenomenally helpful in finding those companies and founders? Right. AI for us, internally, phenomenal. Top of funnel, phenomenal. Keeping Us on process and organized. It's taking everything we're doing and saying, hey, we're missing these things or not. But look, ultimately it's our job to go out and meet every single company and all the trends that we care about, spend real time with the founders and then you make a risk adjusted decision of hey, do we feel like this founder and team are differentiated enough in this landscape of 20 or 25 companies? Again, because there's so many more now, if we can't make that decision, let's wait for the series A. If we can't make that decision there, let's wait for the series B. The biggest mistake you can make in our business is backing the number two, three or four business in any given market that ends up working. Because man, if you're right on the trend and you're right on the market and the rust is there, but you

[Gokul]

just happen to pick the number two

[Michael Gilroy]

or number three, not only do you lose money, but it's the opportunity cost of putting a lot more money into a business that's going to make money

[Gokul]

for ourselves and for our investors.

[Host]

Your previous firm, CO2, just put out this graph showing that it's easier to give from $100 billion to a trillion than it is to go from $10 billion to $100 billion. And it's easier to go from 10 billion to 100 billion than it is from 1 billion to 10 billion. In other words, ventures becoming extremely consensus, how do you integrate that into your business?

[Michael Gilroy]

It is at the growth stage where they're playing right at the getting to 100 billion. There's a lot between 0 and 100. To get there is the hard part. Now what we are seeing are these very large firms dumping historic levels of money into the perceived winner in the category. And these are just good old network effects.

[Gokul]

Once you have these data sets, they are compounding very differently than they used to.

[Michael Gilroy]

And so that strategy is very clear. However, it is consensus and it may return.

[Gokul]

Consensus style returns.

[Michael Gilroy]

Our job and our hope is we want to get to well before 100 billion, right? And then we'll have them raise that capital then. And so that is the challenging and fun part of our business today.

[Host]

And if you subscribe to the idea that venture is becoming consensus, how in the world do you go about competing against the multi stage firms?

[Michael Gilroy]

Look, we started Marathon as a firm that does two to three deals per year with four investors that are working their tail off all day, every day. And AI has created an environment where having agents running around booking meetings for you. And doing diligence is no longer an edge. What is an edge is years and years of experience, years and years of experience working together, complete and total dedication to an investment process that we have

[Gokul]

laid out and talked about relentlessly.

[Michael Gilroy]

And then lastly, the human component of this, right, platforms are owning Mindshare and owning the world. Today. They also have 5, 600 companies in the portfolio. We want to focus on a low end number of portfolio companies and founders and lean into the human component of this business. I got my start in this business with a firm called Kanin Partners. My mentor Dan Saporin hired me there and that's kind of exactly what it was. It was one to two deals a year per partner. Really focused on the human. Every board meeting in person, this is a 10. Well, now it's a 20 year journey from seed to public. And we are not indexing the market. We want to go deep into very few relationships and, and that's what differentiates us. Right? And by the way, I'm not the type of person in an ecosystem to

[Gokul]

say our capital is different.

[Michael Gilroy]

At Marathon, it is a very, very

[Gokul]

fiercely competitive market with small firms and large firms alike.

[Michael Gilroy]

It's our job to win the deal before we get there. And there's just a lot of focus that is required to win a deal here.

[Host]

How would you describe your right to win?

[Michael Gilroy]

All four of us show up every single meeting. And most board meetings, the founders have direct access to the GP as opposed to a platform team. Ultimately, people don't want to work with the platform team. They want their GP and the GP's relationships to get there. We have this concept of pre portfolio. You can have many of these, by the way, at any given time we have three or four of these companies. And so I talked about this earlier, okay, trend tam business model works out. Now we've picked the one, maybe two companies in a trend that we really like. Let's work for them as if we're on the board. And so that way when the round comes and we have the option to lead the round or not, and this is, you can only do this if you're saying no to all the other stuff. We're not reactive to trends or subsectors where we don't feel like we have a right to win to begin with. And so by being focused and by saying no, we can pour time into these founders when they're like, man, the platforms are, yes, they're really, they have

[Gokul]

the mindshare, they have the brand, they

[Michael Gilroy]

have media companies now, but the GP is not texting me every day, the GP is not asking me for the latest pipeline so we can go out there and help them win. The announcement that we just have today is a company called Stryker. It's AI Agent Security. We came in and just hit our network so hard and brought tens of customers to them out of the gate. And the founder called us one day and he's just like I've never seen or heard of anything like this. And, and that's where we want to make our brand. We're not very loud out there. We're going to keep the firm small from both an AUM or not a fund size and team standpoint. And the only way to continue this strategy is by doing that we will never be an index firm.

[Host]

I previous had Ron Rofi from Rainfall Ventures and he talked about how he got into the Robinhood round and he just delivered. He flew out to la, he met with the CEO, he flew out to la, he met with Vlad and he just kept on giving value out. And then when the round came in, the CEO gave him access to the opportunity to invest. And we had a discussion about whether that was rational for the CEO to do that. And the thought experiment there is, let's say that the CEO does not care at all about relationships or reciprocity, essentially is close to a psychopath. Should he or she actually give allocation to somebody that's provided a lot of value add? And the answer is yes. And the reason for that is what's highly predictive of how somebody will behave in the future is how they have behaved in the past. And the best predictor of value add and providing value to a company is actually providing value add already. And when you're a hot company and you're going out for a round, every single venture capitalist is and unfortunately this is an incentive they're incentivized to sell your dream. We're going to be there, we're going to be introducing you to a hundred customers and then you have a Michael that has already introduced him with his team to dozens and dozens of people who's more likely to continue providing this value add. So even if the founder doesn't even care about relationships, still highly rational for them to give you the allocation.

[Michael Gilroy]

I love this. And this is what is changing right now. And I think the best founders are starting to see that because they have been sold this over promise from the platforms for six, seven years now. The way we talk about it internally is if we do what we know we can do in our pre portfolio and A round comes up and we don't get allocation hasn't happened yet. Let's hope it never happens. We want it to feel like a breakup, right? And you're kind of like oh, I'm hurt, I'm shocked, right? We've done all this great work together, right? I love you. I just think if you really put your whole heart into it, you love the trend, you love the market, you've shown up. A non psychopath is going to say yes 10 out of 10 times, right? Who would have?

[Host]

And even a psychopath, I would argue probably nine out of ten times.

[Michael Gilroy]

By the way, if that one out of ten psychopath that says no, they're not just treating us like that, they're treating their service providers like that, they're treating their employees like that. They're treating the other investors like that. Man, what a dodge bullet that is. I don't want to spend 10, 15 years of my life with somebody like that, right? And so I think that's very, very important. Very few people do it. We call it the anti ozempic way of life. It's just good old fashioned hard work and discipline getting you in the room and keeping you in the room and winning that business.

[Host]

I'm curious, does this approach work much more when there's already a multi stage firm on the platform or whether they raised in previous startup?

[Michael Gilroy]

We love founders that have multi stage platforms on the cap table either currently or before because they see the difference. They really, really do.

[Host]

They also already have the brand halo from that.

[Michael Gilroy]

The area of the brand halo, which by the way I would argue is slowly going away. I think that brand halo exists more with first time founders and with LPs who've known them for a very long time. Mature founders who have been around, they know that hey, we're going to be sold something that we don't get. I'm probably going to end up with two or three different board members over the life cycle of my company at this platform. Unfortunately, a lot of GPs are leaving their firms right now to go and start smaller shops and they say, hey, they may pay the highest price and they may say the best things and they may send me the nicest things in a win motion at the start of a deal or finish line of a deal, but they're not actually going to do the things that they say they're going to do. I also just want to say this is a human capital business. We're speaking in generalizations. There are phenomenal individual investors inside of all of these firms. And many of them are the reason why these firms earned the right to become a platform. And so some of them do show up. But in aggregate, this is absolutely the truth on the ground today.

[Host]

There's also this highly underappreciated aspect of a founding GP making a promise versus a GP at a firm on two levels. One is, as you mentioned, there's a big trend where GPs go out and spin out and start their own firm. So they may not even be there, but also they may not even have the agency to fulfill the promises that they made.

[Michael Gilroy]

By the way, that's true on deal terms. You can have somebody who works for

[Gokul]

somebody else going out saying, yeah, we can do this.

[Michael Gilroy]

That changes the way the founder's running the process. And those are kind of the worst outcomes there. I would like to think. I always had great empathy for founders before I was a founder myself. Boy, has it changed once you are in the seat and every single thing going out the door is a reflection on Marathon, which is a brand that I have a four year old daughter. I genuinely hope that she is working at and running the firm at some point in the future. Every single thing we're doing from the legal docs through how we're hiring and structuring these contracts and investments, we're building this firm for the long term. And this is not going to be an Aum grab. This is going to be hopefully a Moykin IRR grab.

[Host]

I had this very conversation with Ryan Sirhant, who's been on the podcast several times about why he called his firm Sirhant. He had a long discussion with his investors. Investors wanted him to call it Sirhant. He wanted to call it another name. It's eluding me right now and the downstream consequences. And this is an extra layer. So you have Marathon, which is your identity, but it's not your name. But the extra layer of just having your name on the firm and the way he described it is every single closing document, every inspection, says Sirhant. There is no way that he's able to put any kind of air between himself and the brand.

[Michael Gilroy]

I love that. It's another great forcing function. And it also. But I would also say being a founder, your identity is already there, right? And so at Marathon, I see that out there and I don't need my last name to be there in order to feel that. And you also. It very quickly distills what matters and what does not matter. Right. When we started the firm, along with Chase and Alex Gokul and I, my first Title was financial analysts and Gokul's was associate. And it created so much confusion in the market. Our LPs ended up emailing us like, hey, we should change this. I think people, people don't know what's going on there. Why is Gokul an associate? But it just, it didn't matter in what. We wanted to send the message to our team and to our founders and to our investors that there's no work that's below us. And we love the work behind the scenes because that's what makes you great. If I'm not in the model, if I'm not in the deck, if I'm not on the calls, I can't make the best investment decision. And again, how does that scale? It scales by saying no to other things. If a founder calls me and says, hey, we have 48 hours, I need a term sheet, I'm like, awesome. Godspeed. Internally, I'm going to come back and say, guys, how did we miss this? What can we do to be better from a coverage standpoint? But we're not making an investment decision 48 hours, period, ever. We're going to win the deal before it gets there and we're going to spend a lot of time and feel good about the investment decision. And so that enables us to actually functionally be an analyst and an associate at a firm that we founded.

[Host]

I think oftentimes about dumber's number, the 150 relationships you could have in your life. And it applies to every single human being. They've done multiple studies, they've recreated studies many times. It's roughly 150 people. And people are subjected to this 150 relationships. Whether they accept it or not. There's no opt out. And I'm going to manage 450. Trust me, I've tried with this podcast, having 400 guests, and still, I'm still being pressured in this 150 relationships. And it's a highly underestimated aspect of being a good investor.

[Michael Gilroy]

I would love for Dunbar to rerun that exercise for parents of toddlers, because that number is probably a little bit south of 150 for me today. It's a great thing to think about in life. And what I would tell you is for us, anytime I'm talking to folks about running the firm and starting the firm, the privilege of this moment for me and for us is we get to hand select every single person that we talk to and work with every day, not just our founders, our investors, all the way down, right? And what a Privilege in life, that is. And there's a certain amount of people who are going to make that 150 and we're going to work really hard for them.

[Host]

Speaking of investors, you raised $400 million in one of the most difficult fundraising climates really, since 2001, since the dot com bust. How were you able to accomplish that?

[Michael Gilroy]

We've been very, very fortunate to have the capital to go out and back this next crop of founders out there and do what we all love to do. How did we do that? It wasn't easy. I've been telling everybody who will listen, everything is harder and has taken longer than I thought it would, but it's a million times more rewarding every single day coming into work, if we can even call it that. Working with these founders almost out of the gate. We had to. Our first two big yeses are on

[Gokul]

our LPAC wrote big checks to us

[Michael Gilroy]

and that certainly helped quite a bit. You ask why? And I think what our investors have seen is of the 12 deals that I did at my prior firm, Gokul and I co invested on eight of those 12. And we kind of fell into this motion where. And accidentally where I'm a finance person,

[Gokul]

I was a banker, and I've been an investor my whole life.

[Michael Gilroy]

I would go in and underwrite the specific P and L, the market structure. Hey, here's what we think this opportunity can look like. Hey, Gokul, there's nobody in the world with an operating background like your own. Can you go spend time with the team to look at team structure plans

[Gokul]

around that product velocity, product potential?

[Michael Gilroy]

And if those two things come back as a yes of those eight companies, the results are pretty dang good. And they see the fact that many of us have worked together directly for a long time. This is the second time I hired Chase Packard, who has become, you know, one of my best friends in the world and obviously close business partner. And then Alex Gorgoni, who was most recently at tcv. When I sent an email out, we needed somebody who was the best in the world at what they do, focused on the enterprise, true enterprise software sales motion and overall obviously business model. His name came back to me from like seven different people. And when I sent that email, I said, hey, I need somebody with what I just said, best in the world at what they do. And two, an exceptional human being who will work well with me. And I only sent this to people that I know really well. We spent seven months with Alex and I would say the first month with ag, it was the Model, case study, da da da da. Classic stuff. The next six months, just personal conversation. We were going on hikes, we were

[Gokul]

going out in the wild, going to dinner.

[Michael Gilroy]

I really wanted to know the human behind the investor. And that's really, really important to us. And then our most recent addition to our staff is Grace Everett, chief of staff. She was actually sent over to me by somebody that I love and trust,

[Gokul]

that I had worked with before. And she is a sibling of that person, which is the highest compliment I think anybody can ever give somebody.

[Michael Gilroy]

She also talked about David Goggins at the first interview, and I was like, I don't need to spend seven months with you if you like Goggins.

[Host]

Me and David Goggins went to the same high school, both cut from the same clock.

[Michael Gilroy]

Goggins is responsible for me running my first marathon. I did it last year when the news dropped that we started marathon. I of course got like 50 different texts, are you going to run a marathon? And I'm like, oh God, we made a huge mistake naming the first marathon. I don't want to run a Marathon. And 3am One night I was watching his videos and I just signed up. I was like, we're going to go and do this. So you can thank Goggins for my knees still hurting.

[Narrator/Announcer]

Support for today's episode comes from Square the all in one way for business owners to take payments, book appointments, man staff, and keep everything running in one place. Whether you're selling lattes, cutting hair, running a boutique, or managing a service business, Square helps you run your business without running yourself into the ground. I was actually thinking about this the other day when I stopped by a local cafe here. They use Square and everything just works. Checkout is fast, receipts are instant, and sometimes I get loyalty rewards automatically. There's something about businesses that use square. They just feel more put together. The experience is smoother for them and it's smoother for me as a customer. Square makes it easy to sell wherever your customers are in store, online, on your phone, or even at popups. And everything stays synced in real time. You could track sales, manage inventory, book appointments, and see reports instantly whether you're in your shop or on the go. And when you make a sale, you don't have to wait days to get paid. Square gives you fast access to your earnings through Square checking. They also have built in tools like loyalty and marketing so you're a best customers keep coming back. And right now you could get up to 200 off square hardware. When you sign up at square.com go how I invest that's s q U-A-R-E.com go how I invest With Square you get all the tools to run your business with none of the contracts or complexity. Run your business smarter with Square get started today Support for today's episode comes from Square. The all in one way for business owners to take payments, book appointments, man staff and keep everything running in one place. We Whether you're selling lattes, cutting hair, running a boutique, or managing a service business, Square helps you run your business without running yourself into the ground. I was actually thinking about this the other day when I stopped by a local cafe. Here they use Square and everything just works. Checkout is fast, receipts are instant, and sometimes I get loyalty rewards automatically. There's something about businesses that use square. They just feel more put together. The experience is smoother for them and it's smoother for me as a customer. Square makes it easy to sell wherever your customers are in store, online, on your phone, or even at popups. And everything stays synced in real time. You can track sales, manage inventory, book appointments, and see reports instantly whether you're in your shop or on the go. And when you make a sale, you don't have to wait days to get paid. Square gives you fast access to your earnings through Square checking. They also have built in tools like loyalty and marketing so your best customers keep coming back. And right now you could get up to $200 off Square Hardware. When you sign up at square.com go how I invest that's s q u a r e dot com go slash how I invest. With Square you get all the tools to run your business with none of the contracts or complexity. Run your business smarter with Square. Get started today. Support for today's episode comes from Square the all in one way for business owners to take payments, book appointments, man staff and keep everything running in one place. Whether you're selling lattes, cutting hair, running a boutique, or managing a service business, Square helps you run your business without running yourself into the ground. I was actually thinking about this the other day when I stopped by a local cafe. Here they use Square and everything just works. Checkout is fast, receipts are instant, and sometimes I get loyalty rewards automatically. There's something about businesses that use Square. They just feel more put together. The experience is smoother for them and it's smoother for me as a customer. Square makes it easy to sell wherever your customers are in store, online, on your phone, or even at pop ups. And everything stays synced in real time. You could track sales, manage inventory, book appointments, and see reports instantly whether you're in your shop or on the go. And when you make a sale, you don't have to wait days to get paid. Square gives you fast access to your earnings through Square checking. They also have built in tools like loyalty and marketing, so your best customers keep coming back. And right now, you could get up to $200 off square hardware. When you sign up at square.com go how I invest. That's s q u a r e.com go slash how I invest. With Square, you get all the tools to run your business with none of the contracts or complexity. Run your business smarter with Square. Get started today.

[Host]

So going back to the recruiting of Alex, you spent six months getting to know him as a human being. Obviously that's important, but why focus so much on that?

[Michael Gilroy]

It even goes back further. At one point in time, an investment banking analyst and the world does not view investment banking analysts. It's 0 to 10. I'll put us somewhere at like a 2. We carry stuff to meetings. We're forced to work long hours. People very rarely even acknowledge your existence in a big meeting. Tim McAdam, one of the most senior partners at TCV, we're working on this transaction. It was a company called TOA Technologies. This was field service management back when you had three to five year multimillion dollar contracts. At the start of almost every call, he would acknowledge me and talk to me like I was a real human being and almost a peer. And I was just a young analyst at the time, never tried to keep in touch. I was like, he's just a great human being. But it stuck with me really forever. And anytime TCV came up, I would talk about him in that way. And then when Alex was first introduced, I was like, tcv. I was like, he works for the greatest human being I've ever come across. He treated me as a lowly investment banking analyst, like a peer. So it already started in that way. So why is this so important? Look again. Going back to. In a world of AI where everybody's looking at the same stuff and they're trying to automate everything in their lives, you forget that we're all still human. We want connection. We want to be made to feel special. We want to feel heard, we want to feel understood. And people who are good people, they treat. We went out to lunch and I made a point. We went to like a burger spot. Please and thank you. Every single time somebody came to pour the water, did he leave the trash on the table when we walked out or did he go and bust a table himself? All of these things. The way I like to describe the people that we have at the firm are soft spoken, somebody you would want to have at a family dinner and welcome there. But when it comes to your craft and they get excited about something, you're going to feel like they're going to jump across the table and choke you out if they don't get what they want in that situation. Right. And it's obviously, I'm speaking figuratively, but we want that passion behind the craft while still being an excellent human. And that is something that if we maintain that and we maintain a focus on process, which by the way, good, honest, disciplined people will continue to focus on process regardless of where our Morgan and IRR end up over time. If those two things are true, I'll consider it a success.

[Host]

You started the firm with Gokol. I've known Gokol since 2009. Now 17 years, which is kind of wild. How would you describe how he looks at deals and how is that differentiated?

[Michael Gilroy]

So the first thing I will say about Gokul, there's a ratio that I have come up with, which is ego to success ratio. And he's had a lot of success and the man has no ego. He is a lifelong learner and which

[Host]

is why he took the associate title, correct?

[Michael Gilroy]

Correct. He just wants to spend time with founders and he just wants to learn. We had an offsite two weeks ago in our LA office and he did a full teach in on Claude and building skills and we had four of us in the room and it was one of the best product minds in the world teaching us how to build product internally at the firm. And what a beautiful and fun moment that was. Gokul is the eternal optimist and I'm the career investor finance guy. That is the eternal pessimist. And that creates a phenomenal combination when the relationship is built on trust and seeking your partners to get in the way and save you from yourself, as opposed to the opposite. Gokul is extremely founder focused. He's extremely focused on what can this be? He's extremely focused on. And this is the thing that I just. You can. Nobody can ever replicate team quality, team structure. He'll get in and ask questions that in a million years I could have never asked, let alone make something of what the answer ends up being. And that's just a weapon. And he loves it. He is the hardest working person at our firm by far. You look at his calendar, it's now Monday through Friday, it's Monday through Sunday. We have meetings. He's texting us about meetings that he's doing all day Saturday, all day Sunday and just loves this stuff. And he says success comes at the intersection of passion and ability. And he has both of those. And he's found what he's done just like the rest of us have.

[Host]

I think this archetype of what I would call a high EQ and a high iq. People partnering together or this pessimistic worldview with this optimistic worldview is so valuable, especially in venture because you need to have both. Because if you just have an optimistic worldview, you're not going to have the right portfolio. You're going to be over levered. If you just have the pessimistic, you're going to be off by an order of magnitude going back to Uber. I think the thing that people missed there, and you said it, but you said it was very subtle, which is you need to have both, but you need to have deep respect between the two partners. And that's extremely difficult to find people with two very different worldviews that have mutual respect.

[Michael Gilroy]

I love that you said EQ iq. We actually have. So we have a marathon university culture deck and it's culture and process and the way we run our firm, we actually say EQ IQ and rq, which is rational, right? And it's exactly what you're saying where we know the other person has the certain set of skills now when they are proven wrong. And in our business, because you're making so many decisions, you're proven right or wrong every day and then over the long term of investment, you're certainly getting that in. And so we have a rule, if you're wrong, something big, something small, you say it out loud or you write it down in the moment that it's happening. And so there's deals we passed on, there's things just decisions around pro rata or decisions around terms and our lpa and we both come to each other and said, and it's not just I was wrong, it's I was wrong and you were right. And it takes a mature person who wants to build and maintain credibility with their partner to be able to say that. And that's a beautiful thing, right? It really has enabled us to keep and maintain that trust. It's just the most important thing in any relationship.

[Host]

My wife Jessica commented on how me and Curtis argue and she said, why do you guys argue like that? And I said, what do you mean? He's like you guys keep on adding to each other's argument, and you're not really arguing like regular people. And I explain, well, it's because we

[Narrator/Announcer]

don't have our ego in it.

[Host]

I think the mark of an egoless relationship is when you don't remember who actually came up with the idea. And if you could build that culture, we just hired our seventh person. It starts to actually permeate. And some of that is self selection in terms of the people you attract. But when people see the founders don't bring an egotistical aspect to it, they start to actually buy into this culture. It's quite fascinating.

[Michael Gilroy]

Keeping score is the fastest way to a death of a relationship. There's no doubt about it. And on debating, by the way, you prompted me a little bit. People often ask, is that Kenan Cotu, like, you know, which firm or culture are you trying to build? And the answer, of course, is always like, neither. We're building it our own way. And in a really special way. I'm curious how you guys debate, but we go at each other hard, all four of us. You will see the most spirited debates insofar as Grace, recently, when she came in, we were having a really intense debate on slack, and I called Grace and I was like, hey, just so you know, like, this is how we

[Gokul]

talk to each other.

[Michael Gilroy]

We're just trying to get to the right outcome. And she's like, I love it.

[Gokul]

I don't care at all. Which was also another good sign that

[Michael Gilroy]

we made an amazing addition to the team. But that debate is just in the spirit of getting to the right answer, because we only care about returns, right? I don't care about being right. In fact, like, I'm thrilled to be proven wrong if it makes us money. I'll be wrong every day if that's the money making way. And that, I think, is the really core pillar behind a good firm and a good culture.

[Host]

It's interesting. I've also realized this with podcasting is. It's a bit of a paradox. But the more cutting of the questions I have, the more that people feel heard and respected. Because you wouldn't ask a really tough question to somebody unless you believed in their ability to answer correct.

[Michael Gilroy]

That's exactly right. And the uncomfortable truths get you to the right outcome. Best outcome, you know, a lot faster. And so none of us hide behind any of these things. We say it out loud, and it's a really special thing. Like, it's warming my heart sitting here thinking about it.

[Host]

And I know you're building Your own firm. But what best practices do you bring from Kanin and CO2?

[Michael Gilroy]

Yeah. So at Kanin, I learned how to be an early stage venture investor and private company board member. Right. That firm was a lost start. It's a lost. It's a lost start indeed. I started my career at a firm where every other month we're looking at pacing, we're looking at reserves. So it's portfolio construction. We have exposure to what segments. Hey, Michael, you've deployed a little. You're deploying a little bit too fast. Maybe we should slow down a little bit. Because the best investors in the world at the early stage have one to two huge ideas that they won't be able to sleep without. And then I really, being a private company board member is just something that not everybody has the ability to do. It requires an immense amount of patience and psychology. And that has created me as a board member. You know, a lot of time before invest founders, like, what kind of board member are you? And I always say I'm a chameleon. It's my job to learn you and to make sure I am doing the things that you need me to do to get you going and keep you going to get the success that you need. I have one founder, I really know my founders extraordinarily well and what's driving them. I have one founder, he's building a business because he grew up in a, in a really tough neighborhood internationally. He got a scholarship to Stanford. Not a scholarship, but he got like a week or two week long tech camp at Stanford and he decided there and then, hey, I'm going to build a tech company. I'm going to take it public on a US exchange, either NYSE or nasdaq, and I'm going to come back and give my wealth to the community. Because he grew up in a really tough spot. I have another founder, he just wants to own a Gulf stream and that's perfectly fine as long as you're aware of it. And so founder A, I'm like, hey, how can we get you public? And he's actually close to going public now. And so we're talking about that and like what a beautiful moment that is. And with the ladder, it's like, hey man, this is going to be the best way to grow the business. And here's how much you own and this is how much money you have. Like, you know, we're getting pretty close to a G6 here. And that it truly is okay. But it's really, really important to understand that. And then what did I take away from CO2? Man, there's so many different things that Philippe had taught me over my time there. One, the way he showed up, it could be a multi hundred million dollar position in a public company or it could be a $2 million seed check at 3 in the morning. He's going to show up and he's going to show up the same way with the same intensity. He hates losing. I have a younger sister, she's four years younger than me and she would tell you that I'm the most competitive person she's ever met in her life. Like, you know, wouldn't let her win anything growing up. And I look at somebody like Phillipe and he's just, he is fiercely competitive, he's fiercely innovative. And while I learned how to be a venture investor at Kanin, I learned how to be a money manager at coatu. There's a polish and a seriousness that managing money necessitates and he expected the best out of everyone every step of the way. It could be an email, it can be slides going into our agm, the number of reps and focus on the little things there, process and anything going outside of the firm was just something that I've never ever seen before.

[Host]

Did that permeate through cotu?

[Michael Gilroy]

It truly is top down slack post, right? They do a phenomenal job creating visibility inside of the firm because they believe that makes everybody better and across products. Very early on I remember I got a call from Fleep. I had posted something about some like series A fintech trend or business and I get on a zoom and it's like the whole hedge fund team, it's

[Gokul]

like, Michael, let's talk about this thing that you said about this trend and

[Michael Gilroy]

how will it impact this public company? And he just did a phenomenal job kind of gathering that data. But that meant I was like, oh God, everyone is reading my stock post. I thought it was just like the venture and growth teams here. And if there was a mistake in that stock post that can impact not just the, the Series A I'm looking at that could impact how we're operating on the board of a growth business or making a decision on a big public position. And so there's a lot of scrutiny on it, right? Like if my team, I saw my team post something publicly, I'm like all over that thing.

[Gokul]

It better be right, it better be formatted.

[Michael Gilroy]

The way you do one thing is the way you do everything. And that's, it's absolutely true there looked

[Host]

at different financial models. Kanan and CO2, you mentioned that you make two to three investments a year. How do you put together your portfolio

[Michael Gilroy]

with the best companies? Hopefully. But look, we want the best risk adjusted return we can possibly get at any moment in time and I know that's like pie in the sky but that's ever changing and dynamic on a week to week basis. The end markets that we are investing in currently are software and Fintech and because of how long we've been doing this, there's pockets, each of those that we want exposure to. In any portfolio you need to manage risk and not be over levered to one trend more than the other. So we think about the sector allocation and the stage allocation all the time. But I also think it's very important to be flexible and not overly prescriptive. I'm not going to come out of a, an off site or a partner meeting and say we're behind on pre seed deployment, let's go do a pre seed this week.

[Host]

Right.

[Michael Gilroy]

It just artificial constraint.

[Gokul]

Yeah.

[Michael Gilroy]

Life doesn't work that way and but

[Host]

how do you communicate that with LPs?

[Michael Gilroy]

The communication with LPs is we're building a highly concentrated portfolio in the first funnel. It'll be 10 to 15 names and we want those to be extraordinarily high conviction where we can build that position up over time we'll get to a max position size in the fund and we've been blessed with LPs who are very, very excited about and trust us to do co invest into our very best name so that we can support our companies all the way through ipo. But that's really it, it's like look, we are, we're multi stage with an eye towards early stage because we are in the business of ownership the same way founders are and we want to own as much as we possibly can but we, we're not going to go with tick earlier if we don't feel great that this is the winner. And so sometimes you have to be patient. The corollary to this question is pacing. We're on the kind of standard three year initial deploy but if it takes five years it'll take five years. Right. And by the way maybe it'll be two years in some funds but that's because we feel really good about the risk. But I don't let us focus on the sector and trend and stage and pacing components of the business because the, I'm looking at it but I don't want everybody hunting in that way. We need to do the best deals that we have access to and can win at any given time.

[Host]

So another way I asked you, how do LPs react to not optimizing on different investments at different stages? And you answered that that's what they signed up for, that's the story that you sold them, and that's what they're subscribed to.

[Michael Gilroy]

Look, ultimately, in this business, returns are going to keep you in business forever. Now, investors just like us, they need exposure to certain things. They have other managers, you know, focused on other products and stages.

[Host]

They have to kind of put you in a box totally.

[Michael Gilroy]

And so our box, to be really clear, is Early Stage Venture Capital. But our first company was a pre IPO deal. It's the largest position in the fund, and we did that right out of the gate. And I would say if we went and polled all of our investors, 100% of them would say, the only thing we're upset about is we wish you got more exposure to it. And so we're not going to be hunting there every day. But if we see an opportunity like that is, in our view, unique access to something extraordinary, we just have to do those. But every other deal besides that one so far has been incubation through Series B.

[Host]

What's the number one lesson you've learned about dealing with LPs?

[Michael Gilroy]

They're all people, right? It's not, hey, here's my mock portfolio construction. And we're going to go and give you software and fintech, they want to know the person too. And in fact, I really love that aspect and component of it.

[Host]

They're your true partners.

[Michael Gilroy]

They're true partners. I can't even tell you how many LPs we're on a text basis with, we're sharing updates with. They've become very close advisors to us. And I can tell you when you leave a place that could have given you and your family a lot of stability for years and years and years, six months after that decision, you're like,

[Host]

oh boy, into one of the most difficult markets.

[Michael Gilroy]

Totally. What did I do here? And so, and it has been the most rewarding thing in the world. But those, especially those first two to five yeses, I'll go to war for all of our investors. I will go to war for these people. It's just so meaningful to me that they believed in us and gave us the ability to go out and do the thing that we love every single day. Because without them, we quite literally couldn't do it. And it goes far beyond the money. Just like a great GP and Founder relationship, you want to be able to call them. When you have questions or insecurities on things and you're seeking feedback, you want to be the best manager in their portfolio. Early on, there were so many questions that I had. We have the fund admin, we have finance, we have compliance, all of these things. And the question from us to them is always, what is the best in class way to set this up and run this firm. And so we've built a relationship where we're seeking feedback. So we get feedback that's unsolicited as well. And that's the only way we can be better.

[Host]

Your vulnerability has led you to better information from your LPs, man.

[Michael Gilroy]

Vulnerability. Not just in our business and life. If you start that way, one, it's good for you. Two, it enables you to see the other person. And they say, how are they absorbing this? How are they responding to it? What are they reciprocating? You get somebody reciprocating in that moment. A true relationship is starting in that moment, right? And from there, then it's trust, right? Hey, we're going to send you. We've been told over and over by our largest investors that we are the most transparent firm in their entire portfolio ever.

[Gokul]

Right?

[Michael Gilroy]

We want them to know exactly what's going on with our companies. This isn't two sentences on XYZ Company launched this product and hired a new CFO from XYZ Big company. Like, great. No, it's not a hype track. No, it is monthly results at a high level unit economics, full qualitative overview. Good, bad, ugly. And we're ruthless on valuations and where we have the bookmarked. We don't want there to be any surprises ever with our investors because that just leads to really, really bad things. It's like a good employee review, right? You're sitting down for a review. There shouldn't any surprises in that review. We're talking all day, every day. You should know exactly what's going on. It's almost performative at that point when you're doing a review.

[Host]

Previous guest Mike Maples, famous seed investor, talked about how he went out and raised his fund. He was looking for his true believers and he wasn't trying to sell anyone that wasn't a true believer. To what extent do you believe that's true?

[Michael Gilroy]

You have to be at a certain point in life to go out with that mindset. It is absolutely true. There were many instances where you just feel there's skepticism and diligence because that's where you start, but then there's just like deeper skepticism. And you kind of like, I made so many of these calls. I'm like, hey, like, you know, let's. We don't have an abundance of time. We're sitting here trying to raise our first fund. Like, this is a no. You prompted and you're. It's an uncomfortable truth that saved us a lot of time and that's just the best way to live. But it's, it's absolutely true. But when you find that person that does genuinely want to back you and believe in you, like, man, I'm going to invest in you and do whatever it takes to make sure you're successful and help you so many ways beyond hopefully just giving you returns. Like, our investors are constantly hitting us up to. Hey, can you help us review this name? We're looking at a co invest with another manager.

[Gokul]

And I know you know the what name well because you cover the sector

[Michael Gilroy]

or you're an angel investor or you used to be on the board of it or it's the competitor of a company you used to be on the board of. We love doing those things. Right. I think these relationships are compounding over time and I know that for many of them, hopefully all of them, we're just getting started.

[Host]

You have one of the most unique co invest structures that I've heard from talking to hundreds of gps. Tell me about that.

[Michael Gilroy]

Leaving my old firm, what I knew I needed to be able to quote, unquote, sell to founders or provide to founders is we have the ability to support you from seed to public. You talk about competing with the platforms. That's a big one, right? Founders want that access to capital and they don't want to spend time fundraising. And so we said, hey, how can we make it so that our fund size isn't so big that it's going to hurt returns? We want to make sure that we can provide investors great returns on the core fund while still giving them exposure to our best names at the growth stage, where the return profile may be a little bit different. We can be looking at a pre IPO round that's close to IPO, that's 1.3x in a low 20s, high teens. IRR there's pockets of money that that's a great investment for. That is not a great investment for our core fund. And so we lean on co invest and we saw a lot of co invest across firms throughout zirp and in many cases it worked out, but I think in a vast majority it did not. And so let's go into a co invest process and what's breaking. So I come in, I say, hey, I'm going to co invest $200 million into XYZ name. Now I'm going to go look at a list of LPs. They're all paying me 0 and 10. I'm going to create a deck, I'm going to zoom them and I'm going to say, here's what the company does. It's 0 and 10, here's my model, let us know if you're in. Right? And so they are looking at a company for the very first time and then they are paying you, whether it's 1.1x or 10x the same amount of money. And so starting a firm you have the ability to step back and say how can we change things that everyone just kind of does. And so we said, well the first issue is the best convest happen really fast. And so we're not going to have three weeks or four weeks for you to go out and do work. You need to know the name already. And so I talked about the transparency on the LP reports that we send out. A great co invest program starts with the very first time you get metrics from the company after you invest. And so our biggest LPs, they're getting these monthly updates, they see what's going on in these companies. We had something in December, I'll never forget. It was a fun moment. We had one of our ELPAC members reach out and said, hey, when can we get direct access to this name? There was no round, nothing was happening. And I forwarded to the team, I said, this is how you run a great co invest program because we don't even have to educate them on what's going on because we've done such a good job and doing these things monthly is a pain. It's burdensome. We're checking and tying numbers, everybody's looking at them. But that is going to save us time down the road, which is the best way to invest.

[Host]

You're basically building conviction for your LPs

[Michael Gilroy]

ahead of them or not, right? And it's like, hey, this company has pivoted into this thing and maybe this isn't working. And so it helps them as well. Where they would have gone to spend three weeks on it. That's annoying. It's like, well you made us spend time on this and we don't like it, we're going to pass. And so it cuts both ways. And then I said, okay, we shouldn't get paid the same amount regardless of how the company does. Just basic incentives. And so we said we are going to charge a 07 and a half or 012 and a half. If we beat our underwrite and our model by X percent. It's the same for all of it. We get kicked up to the 12.5%. So what does that do? Suddenly I'm in the zoom with an LP who knows the company cold and and they're looking at a model and saying Michael really believes this model because I would have given him 0 and 10 all day long. So he's leaving 2 1/2% on the table on a really big co invest. And so now I don't have to go back to my committee and just discount everything by 20, 30%. I'm going to use Michael's model and say hey, if he doesn't hit this, we're going to blend our fees down a little bit and go down to seven and a half percent. And so I think the best things in life are simple. And this is just a really simple yet elegant way of. Hopefully they already trust you on the numbers but now you're putting your money where your mouth is and you're only getting paid the 12 and a half if you do your job.

[Host]

So you've set the over under and now you've bet your carry into it.

[Michael Gilroy]

Correct.

[Host]

How did you come up with this?

[Michael Gilroy]

I just sat down with Gokul at the start of this and just said what are all the things that are broken inside of our business? One other thing that we did out

[Host]

of the gate, it's essentially a misalignment with LPs because it's a free option for the GP and the LP. It could be a very large check for them.

[Michael Gilroy]

Exactly right. Because look, especially as the firm grows, not our firm, but as a firm grows headcount, people just want to fill the call invest. What should the model say if we need to go raise $200 million so

[Gokul]

I can get back to my job?

[Michael Gilroy]

That's just the reality of the program. And so the best LPs in the world are doing that extra layer of work. I told you, my LPs are calling on call invest all the time that they're looking at. It's a good company or valuation, all of the above. And so it's just another way of creating trust. But creating trust economically and doing things the right way.

[Host]

What other practice do you do in Marathon that almost no other VCs do?

[Michael Gilroy]

Because of the platform that I was on before and the financial rigor that it demanded, it's impossible to not bring that into the day to day work at Marathon. If you look at our seed and Series A models, for example, they look and feel like a public company model. Like if I were to call my buddies at wellrock or Lone Pine and say hey, let's look at this name and you pull up your model, it will look and feel like that. Now it's a Series A model. The only thing I can tell you about the model is it's definitely wrong. I don't know if revenue is going too fast or slow, but it's wrong. There's no doubt about it. Now what is absolutely accurate is whatever we're assuming the exit multiple is, we're going to have operating leverage within sniffing distance of what it should be for that product set at that point in time for this business. I know what every single business model across Fintech and Gokul knows what every single business model across software looks like at scale. And if we don't, we'll go figure that out pretty quickly because we did it for a long time. And so we say okay, here's what we think the net income conversion off of gross profit can be. And so what does that mean from a multiple standpoint? And so if we are right, this company will trade like this and now we still have to get there, which there's a lot of work to do from Series A to public and that been very fortunate. I have done nine seed deals over the course of my career. I have a 100% graduation rate from seed to Series A. Now from Series A onwards, like there's still again there's a lot of work to do. We can call it one of two things. It's either complete dumb luck, my mom will probably tell you that's the case or two, it's that we underwrite everything like a growth business even without the numbers. And so what does that mean? We're not investing in these science projects with terrible business models and small end markets that somebody else just gets excited about. And it's like I love the founder and we hit it off and he's smart.

[Gokul]

So we're going to go into it.

[Michael Gilroy]

We know that it's going to pass the business model TAM and trend and

[Gokul]

potential operating leverage tests that all these growth investors are doing.

[Michael Gilroy]

And so we need more capital. We want them to be able to back into the company at early growth and beyond. And so I think we just help ourselves by lowering that funnel of stuff that we just know is Unlikely to get more funding.

[Host]

A lot of people will look at that and say doing a financial model for seed or even a series A company is kind of absurd. But they fail to grasp that the most important thing about modeling something is are you smarter after or before the model? A lot of people put this standard where the model has to be within a 20% sensitivity or something like that. That's an absurd standard. The question everybody should be asking is, did this model help me make a better decision? Did it refine my thinking? Did it help me know where my unknowns are? Like, what variables can I even plug into the model? What variables did I not even think about until making the model? Modeling could be such a valuable razor to apply to just better decision making.

[Michael Gilroy]

I completely agree. And if you really study these things over time, what the metrics can tell you a lot about the product or other things around the team. And again, our series A models are wrong. Period.

[Host]

Now, they're wrong on delivery.

[Michael Gilroy]

They're. They're wrong on delivery. But. Exactly. It's such a good exercise to go a layer deeper and understand what's going on. So a great example I'll, I'll walk through. If you ask anybody who's ever worked with me, what is the one metric Michael likes the most? The. You'll hear NDR within a split second of asking the question, why. Okay, so NDR tells us, especially at

[Host]

the early stage, net dollar retention.

[Michael Gilroy]

Net dollar retention. All it means is, okay, we're sitting here in June, and if I'm a business that's selling into the SMB, say we send a hundred customers in June. Now they're a hundred bucks of revenue. They're paying a dollar a month each in December. If they're suddenly paying $200 across that same cohort of a hundred users, maybe 20 of them churn, and they went somewhere else. But those 80 spent more. Now we have a 200% NDR. So what does that tell you? That tells you that the business without any new customers is growing at 100%.

[Gokul]

Pretty awesome.

[Michael Gilroy]

It also tells you that these 80 customers, they must love the product, right? They doubled their money that they're spending on the product overnight. And so it's not me saying, hey, at the series, hey, it needs to be 250% NDR and da, da, da, right? No, it's. What is the NDR relative to the sales motion, relative to the customer base? And is that telling us that there's immense product love? And is it telling us that sometimes it's either existing Product love if it's C based or is it telling us that we have back such a good team in those six months they've launched three other products with new modules and they're upselling them into these modules. Right. And so understanding, okay, The NDR is 250%. Why is it 250% and then it's okay, the business is growing 150% organically. And then if I see Holco's growing at 200%, I'm like, new customers are only growing the business 50%. Right. And so then I'm like, okay, I should go spend some time on, go to market. Is this accelerating? Because that's not going to be enough. If we have this base here, maybe it could be 300%. And if 290 of that is NDR driven, maybe there's a new competitor in the market that we're not even seeing and all the new customers are going to them. And so 300% could be quite bad in that circumstance.

[Host]

Right.

[Michael Gilroy]

And so this is why, yes, like we're not making an investment decision based on the model, but it leads you down the path of so many other questions through diligence to understand. And it's a really core part of our process.

[Host]

Something I've noticed interviewing some of the world's greatest investors. I've now interviewed more than 10 trillion AUM in guests and the greatest, at least financial investors. They look at these numbers, they're almost personify these numbers. They almost become like these people that they understand. Most people will look at these numbers almost as these superficial gauges. They heard on a podcast that 250NDR is good or bad or this kind of growth rate. But the best investors will actually understand the knob that's being turned with these numbers.

[Michael Gilroy]

This job is not spreadsheets. It's, you know how many times we've said it now? This is a human driven job, you know, and if you're going out and investing based on spreadsheets and you have some table that says if these four things fall in this strike zone, then, you know, go and invest, it's just,

[Gokul]

it's never ever going to work because

[Michael Gilroy]

you need to understand, you know, what's driving them. How do we get this founder at G6 as fast as humanly possible if that's what they want? Or how do we get them public so that they can go and give back to their community? Right, right. It's really, really important in the context of all of those things.

[Host]

If you could go back to 2009, when you had just started as an investment banker, what is one piece of timeless advice you give a younger self?

[Michael Gilroy]

Two of my favorite quotes right now.

[Gokul]

What?

[Michael Gilroy]

Punishments of God are not gifts. And then I'm most grateful for all the things that I wish had not happened to me. And so when you look at those two things, I think early on in your career you're taking risks and you have this perceived failure in life. But as you get older and you take care of a sick toddler for three days and get on a red eye right away, and you're very tired at that age, you're saying, man, I'm so thankful for all of those failures and the things that I did wrong. Because I'm sitting here today as a human who wants to take more risks, because I've learned that, hey, these risks can learn to lead to really good things like marathon. And I think so often when, at least for me as a young person, every job I didn't get, like, I, you know, I went through so many super days at buy side firms and I didn't get it. And I just remember being so down and. But every single super day that I didn't get was leading me to the next thing. And I end up with Dan Saporan, who's one of the greatest mentors and friends that I have, going to CO2. There were two companies that we were invested in together and on the board of Together, both of those companies failed. But I went to a platform where I learned so much that changed me as an investor in my investor lens forever. And so these failures, if you allow them to, and you don't allow them to consume, you can be very positive. And I think you hear those two quotes and when you really sit on them, you'll get to a point where you believe them and then suddenly you're no longer a victim, right? You're a victim or a hero in whatever situation it is. And if you're a victim, you can't grow. If you're a hero, all you want to do is grow. And so I think that is a long winded way of saying, I wish I enjoyed the failures a lot more along the way.

[Host]

Anthony Pompliano, who I just had on the podcast last week, said, you could turn a loser into a winner, but you can't turn a winner into a loser.

[Gokul]

Amen.

[Host]

And that is because once you understand winning, you can never go back to

[Michael Gilroy]

it is perhaps the most addicting thing in the world. And winning, I would also say, is not how it's defined outside there. It's internal and it's knowing that you've done the things you said you were going to do for yourself. There's Kobe Bryant would create his off season plan before the season ended every year, and every year it got harder and harder and he would not negotiate with himself throughout that. And naturally, like you're a month in, it's off season. I don't, you know, I can skip today. But that is the winning mindset. He got addicted to winning and that drove him to do the things that he needed to do over time. And so I completely agree.

[Narrator/Announcer]

Michael.

[Host]

Absolute masterclass. Thanks so much for jumping on.