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- [00:05]
Miles
We initially invested in Facebook in 2005. We led the Series A out of our early stage fund. Microsoft had just invested into Facebook at $15 billion. And we had the chance to invest around, like, a little bit south of
- [00:16]
Arun
$20 billion across companies like Cursor, Anthropic and Debias. Sixteen months ago, $150 million investment that I think is up 13x today, and the world is now awakened to this company and how special it could potentially be.
- [00:29]
Molly
You are the growth team here at Excel. We about to apparently get $3 trillion IPOs. How do you expect the market to handle that? All right, so we have a very special group here today. We have the growth team at Excel.
- [00:55]
Matt
We do, we do.
- [00:58]
Molly
How many of you are there? Excel is actually very large. I mean, I was really surprised when we walked in.
- [01:04]
Matt
Yeah, I mean, we're seemingly large by strategy and places we dive into, but the reality is, like, as a team, it's quite small. So on the late stage, in terms of investors, we've got about six investors that deploy most of that capital. And we obviously do it in concert with the whole crew around the table. That crew has been together for a very long time. I mean, the three of us have worked together for 15 years, and a lot of it has grown from within. So a lot of the people you see running around are people that we hope add to that list of six over time.
- [01:32]
Molly
I was surprised too. I already made this joke in the last interview because we did one with the early stage team. But walking around south park, the building is very. It's very unassuming. And then you walk in and it's like Restoration hardware got hit with some peptides, and it's gorgeous. But I think, like, to go back to, like, the firm history, Excel is a very legendary name in Silicon Valley. I'd love to, like, get back to the root there, and then we can go through all the crazy shit that's happening. Oh, can swear, actually, I can swear it's my show, you know. Yeah, I know the crazy stuff that's happening in Silicon Valley right now, because things are happening really, really fast. You're probably seeing companies come at you at a faster clip than ever. Like before, we did this interview at CO2 and the CIO over there on public markets, and we were talking about the size at which companies went public. The largest one was Meta. It was Facebook. You guys were a very large part of Facebook. I think you held 10%. So let's go back to the lore and history of Excel. So maybe talk through that Facebook deal. You guys weren't here at the time, but would love to learn more about that.
- [02:38]
Arun
Yeah, I think Arun and I like to joke that neither of us is. We're not really old, but I think we're just old enough to have seen a couple of distinct technology cycles and a couple of eras of Excel. And we joined at the time when Facebook was a private company in the portfolio, and it was just reflective of where the technology ecosystem was at the time. The thing that still kind of inspires us through the Facebook parallel was it was like the first platform company that we saw. So all the companies, as associates that we were building relationships with, were figuring out how they could build their business atop Facebook as a distribution platform. And that parallel has actually repeated itself multiple times. I think today there's a pretty clear parallel in terms of anthropic and OpenAI and the labs themselves. But that was sort of the ecosystem that we grew up in. And I think we feel today very thankful. We're so lucky to work at a place like Excel at a multi stage, multi strategy, multi geo platform, largely because of all the work that went into sourcing investments like Facebook. Not only Facebook, but a number of other great ones from that generation. And we were lucky to have seen the very beginning of it.
- [03:48]
Miles
I remember our early days. In our first growth fund, we had an opportunity. So we initially invested in Facebook in 2005. We led the Series A out of our early stage fund, and we created this growth vehicle in 2008. Miles and I joined in 2008 and 2009. And one of the first opportunities was to buy some Facebook secondary that came up. Microsoft had just invested into Facebook at $15 billion. And we had the chance to invest around like a little bit south of $20 billion. And I remember two distinct things in that moment. One was, in that era, you had investors that invested in the Series A. Then you had a separate set of investors that invested in the Series B and a separate set that invested in Series C. It was sort of this structured graduation through the ranks. And so it felt unnatural to say, hey, we're a series A investor, but we're investing in the Series C or Series D. It felt it was very different than what a lot of other firms were doing. And secondly, we're investing at $20 billion. Like, what was the upside from there? And so I remember that partner meeting around the table saying, we actually think this could be $100 billion business or more that we could generate north of a 5x. Lo and behold, that was way undershooting what the opportunity and the potential of Facebook was. But I think it just, you know, 16, 17 years ago, I think that was the foreshadowing of the moment that we're in right now, where technology dominates our entire lives. These companies are growing faster than ever, bigger than ever. But even back then, we felt some of those same dynamics and some of those same impulses, I guess, of evaluating a company that was already so dominant, but how big could it actually be?
- [05:28]
Matt
What I remember about that moment, actually, was that we had this very strong venture practice, and we were creating this growth practice. And Ryan Sweeney was actually one of the partners that helped lead the beginnings of our growth practice. And he had us showing up to work in pleated khakis and gingham shirts, and we looked like total idiots. And he would remind us every day to be humble and to hustle, and all of this came on the backs of people that came before us. If anyone's seen Ryan recently, he's wearing a flat brim hat, joggers, and air Jordans. So, like, I think he's done fine and graduated from the apparel side of things. But, you know, if you meet anyone inside the walls here, you're gonna have that humility and a lot of that hustle as well, which stayed with us.
- [06:05]
Molly
Did you guys hold on to that position?
- [06:09]
Matt
To the position, yeah.
- [06:11]
Miles
Not long enough.
- [06:12]
Molly
No. That's not what funded this. Beautiful.
- [06:15]
Arun
There have been a couple of other decent partnerships along the way.
- [06:18]
Miles
We should have held longer.
- [06:20]
Molly
That's awesome. So I want to go through each one of your portfolios, and we'll make it a cohesive conversation. But what I was really surprised about is that you guys are generalists. So how did you come up with. I mean, you all distinctively have different backgrounds and I'm sure networks and that kind of thing. But, like, how do you come up with the theses behind the positions and the different companies that you've invested into? Whether it's nebbys, cursor, lovable, all those types of companies.
- [06:48]
Arun
I think we've always been generalists, but we definitely all have areas of focus and comfort, and then we go really deep in different categories over time. Like, Arun has always spent a lot of time around infrastructure and cybersecurity, and Matt spends a lot of time around infrastructure. I've done a lot of application software and developer tooling, But I think that the way the technology landscape is evolving, I mean, these categories, especially these applied AI categories, can just sort of come out of nowhere and grow. So Quickly that you have to have some mental plasticity to wrap your head around these new categories as they evolve. So we are generalists, but we definitely have areas of focus and we're constantly trying to hone new ideas. And the same premise applies today as always has at Excel. And the way that we've just sort of practiced the job, I mean, you really have to show up prepared, especially in today's market where things move faster than ever. Like you have to have an outside in viewpoint on which company is going to win before you even get the first meeting. And then you have to really show up and add some value and convince this entrepreneur that there's a compelling reason to work with you. And so we are generalists, but we try to be micro prepared in certain categories.
- [08:03]
Miles
One of the best enterprise software investors in the last two decades, I believe is Andrew Bracha, whose background he spent over a decade at Yahoo. He was a consumer Internet guy. He joined Excel with the explicit mandate of investing in consumer Internet companies. But when the advent of PLG started and consumerized enterprise software started, he was actually super well positioned to invest in those companies. He led our seed investment into Slack early on. Samir Gandhi has been a prolific consumer investor, but he's actually one of our leading cybersecurity investors as well. And so I think we believe areas of focus, domain knowledge, that's super important, but it's also really important to repot yourself and to look out because you might have a unique perspective relative to all the people that spend time in that category that might be interesting and unique and actually. Right. And so we encourage that exploration and it's an important part of the way that we function because I think all ideas are welcome. You should focus, but at the same time you should be open to new perspectives and new ideas.
- [09:06]
Molly
Excel is more of a quiet story and like a quiet, I don't know, silent killer. Is that what it is? Maybe.
- [09:14]
Arun
I'll take it. Silent partner. How about that?
- [09:16]
Molly
All right. Excel's more of a silent partner than some of the flashier names, even on this road or down the block. So I'm really curious, from your standpoint, how are you winning these deals against the flurry of marketing and blah, blah, blah and hype that's going on in here?
- [09:36]
Arun
I mean, I think first of all, we approach it with humility. This is a very humbling job and ecosystem. There are a lot of talented investors out there and we have a lot of professional respect for our peers. With that said, I think our style has always just been a little bit to stand behind our founders. And really the equation is very simple. If we do good work over time, that will be reflected in results and returns. And if we're good humans and good partners and pleasant to work with and good backers of our founders, they'll say nice things about us over time. So I think that shows up in scenarios where, for example, when we were able to work with Michael Trull in Cursor, we were really humbled to get the opportunity because it was a pretty competitive situation. And I asked him, after I said, michael, I'm really honored that you picked us. Can I ask you why you had so many choices? And he just said, in a very simple Michael way, he said, I asked around and people said really nice things about Excel. And I think that is sort of the brand that we've tried to stand behind over the years. It should never be about us, it should always be about the founders. And that has been true for 42 years of Excel.
- [10:43]
Matt
I think the other component of that is just that up until maybe only. And we're going to talk, I imagine, a lot about consensus and some of these consensus investments that are driving outsized returns in the private markets. Up until about five to seven years ago, it was almost a religion here, to be the first institutional investor into a company. And as a result, you're almost organizationally introverted. You're spending your time going and finding something that someone hasn't been spending time with or crafting a relationship that can be in some way shape or form proprietary to the firm. And I think internally, we still view that as the most amazing demonstration of the craft, if you're able to do it. Now, we're not oblivious to the fact that there are consensus names where you need to lean into some of the experience and the work that you've done in the past to get access to those and to be a part of some of those phenomenal stories. But a lot of it was that, I mean, we always, I think we always kind of looked at the social media posts about a founder raising a round and a VC making about themselves as like, pretty cringe, like, don't throw your shoulder out patting yourself on the back type of situation. And so we were always just like, take a step back, like, it'll be about the founders. I say all this now. Maybe our comms team has done something related to patting ourselves on the back. But, you know, generally that's just the vibe of the office and the vibe of the firm and kind of how we just think about Practicing the craft adventure.
- [12:00]
Molly
How has funding actually changed over time? We're in a ridiculously chaotic, a little bit schizophrenic era where it is like land grab time, logo grab, talent grab. How are you thinking and like, what are you seeing of the different types of funding and how that's changed?
- [12:18]
Arun
Yeah, I think one way that we think about it, and this is where, again, we're incredibly lucky to work at a place like Excel that allows us to prosecute what we all agree is this generational technology change holistically across every imaginable dimension. And what do I mean by that? We're prosecuting the AI opportunity across every layer of the technology stack. So literally from the chips, to the Neo clouds, to the labs, to the applications, down to the systems integrators, we're prosecuting this opportunity across the early stage and across the growth stage. So at the early stage, we've been the early initiating investor in companies like Lovable, Decagon, Scale Gamma. At the growth stage, we've reflected our conviction in some of the iconic breakout AI companies in terms of some really sizable investments. So just as an example, across companies like Cursor, Anthropic and Nebias, and then also importantly, because it's a hallmark of how Excel functions, we've prosecuted this AI opportunity globally. So not only from our office here in Silicon Valley, but across our team in London, across our team in Bangalore. So holistically, when we reflect on our work over the last couple of years, I think what we see is a $7 billion portfolio of really thoughtful, nuanced investments that we've selected very carefully. We don't believe in a blanket strategy and just spraying and praying and blanketing an entire category where we're going to do every single neolab or every single application category. We pick with subtlety and nuance and hopefully wisdom. And I think that's why our LPs pick good managers. And so I think we've tried to do it very holistically in a way that really there's only a couple of firms in the world that are structurally able to do.
- [14:02]
Molly
How have check sizes changed? I mean, even in Q1, we saw like nearly $200 billion go into like maybe two or three companies.
- [14:10]
Arun
Yeah, there's definitely been an unmistakable concentration of capital and maybe interest around a handful of late stage private companies. We're very fortunate to be a part of a lot of those companies. But the rest of the ecosystem is also growing exponentially and really, really excited. To us, I think, of our ability to reflect our conviction in two ways. The first is just earliness of investment. So ideally we are initiating the investment writing the first check. The other way is just size of investment. So companies that we really feel like are the definitional companies of this era, we're able to invest 4, 500, $600 million at a time, and then we can scale all the way in between.
- [14:52]
Miles
But I think we've been growing and learning with the market too. You know, I think all of us have been surprised, at least myself, about the amount of capital that has been raised in quick succession and how quickly these companies are growing. From a talent perspective, from a scale perspective, Our first growth fund was 480 million when we first joined. It is not unusual for us to invest $500 million into a company, actually to invest over a billion dollars into a company. And so the nature and the scale of the game have changed dramatically, but so has the opportunity on the other side. And so if we believe that these companies can be trillion, multi trillion dollar companies within a very short hold period, we should reflect that in check size. So I actually think the market is totally rational on this. I think if anything, a lot of us have underestimated the potential of AI and the value creation that it offers. And so we're constantly pushing ourselves to our bounds and to our comfort level about our ability to invest and how much should we invest and when should we invest. What are the points of conviction that we're seeing? We could talk through a couple examples of that, but it's uncomfortable and we're pushing ourselves to be uncomfortable because the market is changing, the frontier is moving so quickly.
- [16:05]
Matt
And if you just look at the data for it, it's never been harder to be in the early stage business. The barrier to entry to start a company is incredibly low. And as you think about how many companies are started and how many opportunities are out there, I think when I joined the firm, we probably had 90% coverage over every seed in series A. We're nowhere close to that today. And it's just not practically possible to have that level of coverage at kind of seed in series A. But what we still have is we still have a very small cohort of companies that are the outliers that run into the late stage. And everyone's talked about the private market getting larger, but the returns in the private market at the late stage are actually going to start matching the returns at the early stage. If you look at top quartile performance of early stage funds versus late stage funds, I think they're going to be pretty close to each other throughout this cycle. Now, top decile is a different story in the early stage business, but top quartile for sure. And we're seeing it as you see the scale of the anthropics and cursors and nebuses of the market.
- [17:01]
Molly
I was just talking to Brian Singerman about that. I mean, he did a lot of huge growth deals at Founders Fund and is now investing into managers. But he was even talking about like, yeah, okay, you can get later into the company, park a bunch of money in it and still outperform all the other investors 100%.
- [17:18]
Matt
Yeah, yeah.
- [17:19]
Arun
And I think that opportunity will only grow. I mean, if you think about it, 10 years ago there were zero publicly traded companies worth a trillion dollars. Five years ago there were five companies worth a trillion dollars. As of today, there's 14 with probably three or four private companies that are pre IPO that we could all point to. And I think it's fair to expect there will be $10 trillion companies and beyond over the next cycle.
- [17:40]
Molly
Damn.
- [17:42]
Matt
Fingers crossed.
- [17:42]
Arun
We hope so.
- [17:43]
Molly
That was a good sound bite you got there.
- [17:45]
Arun
Let's go.
- [17:46]
Molly
Preparation over there.
- [17:47]
Matt
Peptides is what that was.
- [17:49]
Arun
Someone had his gluten water this morning.
- [17:51]
Molly
What is.
- [17:51]
Matt
Commercial break?
- [17:52]
Arun
Yeah, commercial break.
- [17:53]
Molly
Commercial break. What is this?
- [17:55]
Miles
What are you drinking still?
- [17:56]
Arun
And sparkle.
- [17:58]
Molly
Okay, no, that. No, but seriously, that is like the. That's zero. Plastic water.
- [18:03]
Arun
No, there's no plastic in it. It's amazing. It tastes. Would you like some? Here, take the bottle.
- [18:09]
Molly
This is too funny.
- [18:10]
Matt
It needs like a little.
- [18:11]
Molly
Well, I have to finish my sparkling water first. A little interlude with Lunin.
- [18:17]
Arun
I gotta get a kickback for this.
- [18:18]
Matt
Yeah, we better get some free equity in Luna.
- [18:21]
Molly
It's all I've been hearing about. Once I got into the office, they're like, there's no more Lunin in the fridge.
- [18:25]
Arun
We have some other stuff we can sell you. We got some crowdstrike downstairs.
- [18:29]
Matt
Those are the priorities here at Excel. Running out of Lunin is water.
- [18:32]
Molly
I'll try it. Oh my God.
- [18:36]
Arun
Right?
- [18:37]
Matt
Mind blown itself. Mind blown.
- [18:40]
Miles
Total placebo.
- [18:41]
Molly
Total.
- [18:42]
Matt
Don't ruin this for us.
- [18:48]
Molly
This episode is brought to you by Brex, my favorite. You become what you spend on. And I refuse to spend my time on work that shouldn't exist. Expense reports, receipt chasing and manual closes the the companies building. What's next? From Vercel OpenAI, Anthropic Granola and Deepgram all made the same call. They all run on Brex. Brex is the intelligent finance Platform that combines cards, expenses and banking into a single stack. With Agentic finance built in AI agents that handle expenses automatically enforce policy before spend happens and close your books minutes. That's why sorcery runs on bre. So I can spend time on building and not busy work. It's time to get breath. Learn more@bre.com sorcery that's b r e x.com s o u R C E R Y Bye. Turing is training the next generation of AI with tasks that require real expertise and real world judgment. That's why companies like Nvidia, Anthropic, Salesforce and Gemini partner with Turing. Turing builds realistic reinforcement learning environments and data systems based on real operational traces. The kind of infrastructure Frontier Labs need to train superintelligence. Visit turing.coms o u R C E R Y Talking about the public markets. Now you have a public market company, Nebius. Let's talk through that, because that is like a really hot company right now. They just had a huge deal. What was it, like $26 billion?
- [20:26]
Matt
Yeah, we announced a big deal with Metta. Yeah. First and foremost, as a venture investor, I wouldn't wish it on anyone to own a public stock. I mean, having the stock apps be like the major app that I use on my phone now, it's very stressful having to mark to market every day. You know, that's an amazing story of an entrepreneur, Arkady, who actually built Yandex, which was built to about a $30 billion market cap on the NASDAQ. And then the war broke out in Russia, and many of the engineers followed Arkady out of Russia, and he basically collected where he was and was thinking about what he was going to do next with all these engineers that followed him. And it was actually one of the founders of Excel, Jim Schwartz, who introduced me to Arkady and basically said, he's trying to think through what's next. He's got a few balls in the air. You should talk to him. And so for a couple years, Arkady and I went back and forth on what would eventually become Nebbys. And actually the early innings of that was me trying to convince Arkady to sell me his 30% stake of Clickhouse, which he rightfully refused to do. But as I got into that negotiation with him, I got to know him as an individual, and he is the most quietly humble killer I've ever met. He is truly, truly special. And of one entrepreneur, and most people would have hung the cleats up and said, I've had a great run I've made billions of dollars from my experience with Yandex and I'm going to retire. And he was thinking, how can I plow this all into infrastructure because I have this unfairly advantaged team to go take it, take that market by storm. And he wanted to do it in a nuanced way at the time. There were other NEO clouds at the time. Obviously we had the hyperscalers coming into the the GPU market. And his view was way, way larger, his vision was way larger than what others were talking about in the market. He fundamentally believed that infrastructure would be delivered in a different way. It wasn't about giving a very large cluster to meta, even though they're a customer of ours and we're incredibly happy about that. It was about thinking about a world where developers that have domain experience working on back end infrastructure, gcp, AWS specific experience, we're going to fundamentally change to be operations founders, people outside of those orgs that maybe didn't have that domain experience, provisioning agents to go interface with infrastructure. And what do all the primitives mean in a world like that where you don't have to understand the massive AWS catalog, but you just interface differently with infrastructure? And some of the areas that we talk a lot about now in the private markets you see a massive growth on areas like inference were always part of the scope of what he wanted to build. And so now you have this engineering culture which is very unique, scaling fast into what I think is a much more durable vision for a next generation hyperscaler for the AI era.
- [23:15]
Molly
And for those who don't know what Nevios is, could you just give like a brief quick line on that? And then also where does it fit for inference people? This will be a wide ranging audience. But in terms of inference, why is that becoming so important now? Obviously we're seeing it with inference agents and more different types of compute that they need and all the data that they're creating. But like, could you just share that?
- [23:37]
Matt
Yeah, absolutely. So at its most base level, Nebius is intending to build a next generation hyperscaler. So they want to own everything from the data center itself through to designing the server racks. They actually have a hardware team inside the company to building all of the software that goes on top of that infrastructure. So we talk a lot about how many data centers need to be built, how many GPUs need to be delivered to handle the demands of AI, both to training as well as inference, which we'll get into in a second. These guys are one of the most aggressive teams to scale that infrastructure and meet the moment. And they want to own all of it vertically integrated. And that's really important when you think about delivering inference. So inference is, we've now trained all these models and we need to get value out of them. So in its most basic form, if you're asking a question of ChatGPT and you're getting an answer, that's inference against ChatGPT, against OpenAI's model. But as you allude to agents start using inference in an exponential way, the demand curve goes way up for we're going to need from an inference perspective. And when you control capacity by owning the data centers and the GPUs and you control the software, you're in an advantageous position to be able to meet the moment and deliver inference for a market that we fundamentally believe is going to grow exponentially. And we talk a lot about capacity planning across the entire ecosystem and we're consistently every quarter waking up and being surprised by some new announcement. Google announcing that they're going to do their first equity raise in over a decade for $80 billion to go spend even more than all of their cash flow on infrastructure. So I still view it as we're hitting one and we're just getting going and there's going to be a lot of scaling that needs to happen to deliver the infrastructure for AI. And nebbyus is going to play a small and hopefully growing part of that.
- [25:22]
Molly
I went to one day of GTC and they dominated. Their marketing was everywhere. It was on like 500 cars and all over the place. And then I was like, I'll check it out. Okay. Next to SK or sk Hynix. Yeah, yeah, those two had really good marketing there, which was very strategic. Okay, so we talked about that. I do want to go into the agentic layer a bit more. I'm sure you're definitely seeing it. And you're seeing it too. Um, but so that is creating like a firestorm of new products for companies, new use cases and just extreme growth for these companies. So like, what is your current view on where that lands in the next, Like, I don't know, by the end of the year. Do you think we're starting to like, kind of see inklings of like actual agent adoption? And like, it's definitely banging around a bit and it's a little bit messy. But like, how do you see this playing out?
- [26:23]
Arun
Can I do something super controversial before we get to this very important topic? Can I brag on Matt for a second? Because he's not going to brag on himself.
- [26:30]
Molly
Do it.
- [26:31]
Arun
So what Matt won't say about Nebias is that today it seems fairly obvious that it's a very buzzy company. Sixteen months ago, when Matt led a pipe investment into Nebbyus, that was not the case. And I think it is, like, very emblematic of original thinking and how we try to function at Excel. If we're passionate about a category, and especially if we're passionate about a founder, we will find a way to structure the right investment. And so whether we are making writing the first check into scale or doing a growth investment in a company like Cursor, or finding a way to make a public investment in a company like Nebbys, I think that just reflects our ability to express conviction in a bunch of different ways. And so, again, I'm bragging on Matt's behalf because he won't do it. It's not sort of who he is. But this was 16 months ago, $150 million investment that I think is up 13x today, and the world is now awakened to this company and how special it could potentially be. I think Matt gets a lot of credit for having acknowledged that a year and a half ago.
- [27:34]
Molly
And a really good retail community.
- [27:36]
Arun
And a really good retail community.
- [27:37]
Matt
It's the branding, though. You know, great branding. We need more merch.
- [27:41]
Miles
Okay, keep rolling on agents.
- [27:42]
Arun
No, you, you go.
- [27:44]
Miles
I think to Matt's earlier point, we might not even be in the first inning of this. The level of adoption and growth that we're seeing on agentic workflow is phenomenal. So we can take Supabase for example, which is the backend database, to a lot of agent workflows and agent applications that's growing 350% at hundreds of million dollars of scale, and they have virtually no salespeople. It's all inbound.
- [28:13]
Molly
That's crazy.
- [28:15]
Miles
And I think we're just now scratching the surface. There's a bunch of orchestration and product development to allow the product to scale to some of the applications that we're seeing. But most of the usage that we're seeing is actually coming from inside the enterprise. What started as a vibe coding backend. So if you're building on Lovable or bolt or V0, you would attach a Supabase database to it. Now we're seeing people in enterprises that are building an application using Claude Cowork or Claude Code or even Codex, and on the back end, it's using Supabase. And so we actually have pretty good insight into this. And the level of adoption that we're seeing in the enterprise for people, for agents, for the workflows that they're doing and the importance of those workflows, it's growing exponentially. And so I think that gives me confidence if we look at some of our other portfolio companies just in terms of where they are in agent adoption and AI adoption as a whole, we're still so, so early and have so much more to go.
- [29:15]
Molly
I'm so curious. So how are people discovering that? Is it just built in to like, I don't know, spin up a new website for me or spin up a new feature or something like that? I asked this because there's a little tangent. My dad just started Vibe coding and guess what he vibe coded guys?
- [29:31]
Matt
A golf handicap app.
- [29:32]
Molly
No. Captain's log.
- [29:34]
Miles
Whoa.
- [29:34]
Molly
Yes. He's a boater.
- [29:37]
Matt
Come on, Steve.
- [29:38]
Arun
Good work. Get that guy some Lunin water.
- [29:40]
Molly
I know, but he, it was really interesting. I was like, he was showing it to me, he was so excited. And it like has tide charts, it has temperature, it's like, here's this route you can take. Here's when the sea is going to be like a little bit more choppy than it's not. And here you can log your trip. It was really cute, but so he was, I was like, dad, how did you do that? Like really, how did you do that? And he was like, oh, I just did it on Claude. I like asked it to do this. It told me I could pick from these three products and that one and I can add this database and blah, blah, blah, blah. And it just kind of did it for him. So is it in the workflows? Like, how is there like something like strategic underneath or like what's going on there?
- [30:18]
Matt
Everyone help him. Steve needs a database.
- [30:21]
Miles
I do think Claude or Codex or all these tools are now recommending a lot of products, products on the back end. So Supabase, is that a paid thing
- [30:28]
Molly
or it's just, they just preference wise.
- [30:30]
Miles
I think the, you know, in the last era it was search engine optimization. In this era it's AI optimization. And so these products are now the distribution mechanism for all the downstream products and services that you can use. And they tend to prioritize the tools that have the best developer and user experience. And so this was actually the early bet of the Supabase team, which is everyone has, there's a bunch of database products that are out there. It's built on top of postgres, which is the most widely used database language and framework that's out there, but it's just an incredibly easy tool to use. And so their first adopter was the YC batch they were in. So 60% of YC companies now choose Supabase. They just made it incredibly easy to use. Turns out if you have that sort of framework and methodology, it makes it really easy for AI to use. It's actually the same reason why we're seeing a ton of growth from Vercel, which is another one, another one of our developer first companies. And so I think it's just a lot of experimentation, people trying using AI and then falling down the rabbit hole and discovering the power of AI.
- [31:37]
Molly
So I mean, I guess on the AI, the agentic, like adoption side of things, these companies are getting another breath of life that they probably had no idea they would reach the scale in the amount of time that they have. Yeah, Cocho put out a super based chart not too long ago that they got like 80 or 90% of their growth and their customers within. It was a really short period of time. It was like 12 months or something like that. I'll find it.
- [32:01]
Miles
But we just crossed 9 million developers, you know, last week when we first invested, it had under a million developers and that was at the beginning of last year.
- [32:10]
Molly
That's crazy.
- [32:10]
Miles
Most of their growth has happened actually in just the last three or four months with the launch of Opus 4.5 and long running agent execution that's driven a ton of growth.
- [32:21]
Arun
And this is where also being thematically focused and tight knit as a group, you see the interconnectedness of the momentum of each of these companies. There was a week a year ago and I remember Arun and I were talking debriefing after having been at a couple of board meetings and I think you were seeing through Supabase, this atmospheric chart that was up and to the right in terms of new developers on the platform. I had been in a linear board meeting the week before and we saw this spike in workspaces being created and we sort of like between the two of us, this didn't catch on. But we started talking about this concept of agentic influence and it was like all of a sudden these agents are making decisions about downstream workflows and downstream tool creation and we just sort of said we have to invest in every single company that is going to be in this flow and every single company, more importantly, that is like the choke point that's metering out these decisions. So that gave us the conviction with our partners Ben Fletcher and Jenya to go after Lovable and When you're sitting in a room of tight knit investors that are all working on similar companies, seeing the same trends in their adoption curves, it gives us a more holistic view on where else should we go be really aggressive and these curves all happen at the same time.
- [33:35]
Molly
That's crazy. What were the main categories that you were looking after?
- [33:38]
Arun
Fortunately, we were already early investors in Vercel, so at that time it had been a huge beneficiary and we've continued to invest over and over again in Vercel. We were investors in Cursor at the time, but we certainly saw a lot of cursor as a choke point for downstream workflow creation and downstream tool recommendation. That probably emboldened us to make our second investment in cursor. We certainly saw the benefit that would accrue to Anthropic and other labs as well. But I think it emboldened us to make not only initiating investments, but also double down and triple down investments on companies that we were already a part of.
- [34:18]
Matt
Yeah, and it took us way deeper into infrastructure too. I mean, we were admittedly slower than our peers on the application layer for AI because we were very worried about how fickle they were when the wakes of the models were getting wider and wider. And we spent a lot of time in infrastructure and we're continuing to spend a lot of time in infrastructure. So we talked about nebbyous, but we are investing in chip layer, we are investing in data labeling like we were with scale. We are investing in pure play inference software providers like Ying and the team at Radix ARC that just came out of xai, they were the inference team there. So we're going to continue to lean into this view that we're in the early days of supporting the infrastructure to scale all the things that we want to do to the right of that and to the right of it. There's a lot of conversations around durability when you get into applications that everyone has hit on over time. But I think probably at this point a pretty consensus view is that we're rate limited on infrastructure and we need to figure out ways to scale that.
- [35:16]
Miles
I think the three categories that we've seen just a dramatic tailwind behind are one developer first, companies that are particularly impacted by AI. Two is just AI infrastructure, all the things that Matt was talking about. And then three is security. Especially with Mythos. The last six weeks for our security companies have been tremendous. And it's counterintuitive. When Mythos first came out, I think the stock market thought that Mythos was going to kill a bunch of our security companies. Just look at CrowdStrike's stock price over the last six weeks. It actually is such a tailwind behind a lot of these companies, especially if you can be the platform that incorporates Mythos and AI Security into your native platform. That's one that we're really excited to and see a bunch of different benefits across many different companies.
- [36:05]
Molly
I want to get to that in a second and we can talk about. Sierra, how do you pronounce Radix Arc.
- [36:12]
Matt
Radix Arc.
- [36:13]
Miles
Radix Arc.
- [36:13]
Arun
Radixr. You guys said totally different things.
- [36:16]
Matt
You're going to have to ask the Indian team.
- [36:18]
Molly
I've been. I mean, I was reading it a couple times. I'm like, nope, I didn't say it right.
- [36:23]
Miles
We have issues internally, obviously.
- [36:26]
Molly
And so who did that one? One who did that investment?
- [36:28]
Matt
That was Ivan, actually.
- [36:29]
Molly
Okay. Y. Oh, yeah. Well, that's why I read about it, because we were interviewing him. Okay, cool. So on the cyber security side, I had a conversation with Gilly Ranin not too long ago. Prolific.
- [36:43]
Matt
He's on a run.
- [36:44]
Miles
Incredible.
- [36:45]
Matt
He's on a run.
- [36:45]
Miles
He's an incredible investor.
- [36:46]
Molly
I'm going to be talking to Sierra in a couple weeks. We're going to be doing an interview with Yotim and Doug at Security Sequoia. He's very excited about that deal. So I'm curious, from your standpoint, so how did you get into Sierra? And for people that aren't aware, this is like, we have to give some background for some of these things, but just break down that deal for us and, like, how important they are right now.
- [37:07]
Miles
Yeah. Well, Sierra, for anyone that doesn't know him, is a AI security company. It started its life as a data security company. And we were initially investors in the first data security business called Varonis that was started in Israel. Our partner, Kevin Camole is actually still on the board of Varonis, and so we knew something about the category. It's always been a good category. Maybe not a great category, but Varonis is a super impressive business. And so the credit for Sierra actually goes to our partner Philippe, that sits in our London office. He does a biannual trip to Israel and meets all the interesting security companies that are there. And he intersected Yotam and there are just these moments where you meet these compelling founders and there's just something about them. With the OTAM specifically, he came out of 8200. He had all the background of being a great security professional, but he's also an incredible salesperson. You're going to see this in a couple of weeks. So compelling. You sit with him for 15 minutes, he can convince you to buy or sell anything. You know, he's just one of those founders and he has this natural grit. You walk away from that meeting feeling like he's just going to build something amazing. And so we ended up co leading the Series A with Doug and Philippe led that out of our London office and that company had a really great trajectory. But you know, there was this moment, I remember it back in 2022, where 1/4 didn't go as well as we were expecting. And we had a conversation with Yotam and we just believed in him and the opportunity. We leaned in in that moment and we actually led the Series B out of our growth fund here. And that was a moment where the category wasn't totally clear. AI had not taken off. I don't think ChatGPT had even come on the scene at that point. And the company was doing well from a product perspective, but it wasn't reflected in the go to market and the ARR ramp. And so that was an interesting investment. And that was also led by our partner Philippe and his conviction in the company and the founder. And a year later, we ended up leading the Series D as well. And so it's one of our largest investments overall. As AI has taken off, Data security has evolved into AI security because data is the fuel for AI. And so they're actually one of the. I think they're the highest valued private security company on the market and right in the tailwinds of everything that we're seeing around AI. It's a really, really impressive business.
- [39:42]
Molly
It was wild. Even talking to Gilly, he's like, I think we sold too low for wiz.
- [39:46]
Matt
Yeah, look at CrowdStrike. Wow.
- [39:48]
Arun
Right?
- [39:48]
Miles
Yeah.
- [39:48]
Molly
Yeah. But in terms of the CyberSecurity Standpoints of AI and what's happening with agents, you're just creating like infinite opportunities for breaches of all types. People are connecting. We did this interview with Merge and it's like they know because they see this firsthand. They're helping companies integrate and connect with any tool they want. And interns can join teams and all of a sudden they're trying out these new tools and they're compromised and there's infinite amounts of potential threats. So you're partnered with some of the fastest growing companies on the market. How are they thinking about cybersecurity when they're implementing more agents and they're thinking about scaling even Faster.
- [40:30]
Miles
Well, it's a bit of an unknown frontier. I mean, the data exhaust from AI is unquantifiable. The amount we talked about falling down the rabbit hole and creating stuff on AI, the amount of creation. AI's democratized creation, in effect. There are 10 million developers. Actually, there are more than 10 million developers in the world. 30 million developers in the world.
- [40:53]
Molly
You know, you're the cursor guy.
- [40:55]
Arun
More than that.
- [40:55]
Miles
But. But there are probably. There are probably 500 to a billion people or maybe even more that are building on AI that couldn't do that before. And so I just think the surface area of what needs to be protected by security in general has grown so massively and is continuing to grow at an exponential pace. But as Mythos showed six weeks ago, vulnerabilities have also grown tremendously and exponentially as well. The capabilities of attackers have grown as well. And so I think the need for security products has only increased. Now the question is where the value is going to accrue. And just like we're seeing in other categories, I don't think there are going to be a thousand different companies. I think it's going to be a few platforms that accrue most of the value in this market. They're the ones that companies actually trust. And so I think Sierra is one of those. CrowdStrike is one of those. Palo Alto is one of those. But the opportunity set has definitely gotten way bigger.
- [41:52]
Molly
We haven't talked about token maxing yet. Why are you laughing?
- [41:58]
Arun
We talk about token vaccine a lot, but I'm like, big fans. Call him Token Matt. Just gonna try that one.
- [42:08]
Matt
Cut.
- [42:10]
Molly
Oh my God, you're drinking too much. Lumen.
- [42:13]
Matt
Yeah. What's in that stuff? No plastics.
- [42:15]
Arun
Yeah, I spiked mine.
- [42:16]
Molly
Oh, my God. So on the topic of token maxing and people just cashing out ridiculously, or crashing out maybe is the right term on token usage. I mean, I know I do this for myself because I'm like, take out all the en hyphens. Like I'm doing ridiculously inefficient things over and over again. Have your teams, have your companies at all talked about like their token bills and how they're going to bring them down. Like what are the best? Like you can't rate limit.
- [42:43]
Arun
Right. It's actually interesting. There is definitely some. Some episodic over consumption happening out there and that's grabbed a lot of the headlines. I think my view, and probably the house view though, is that the overall trend is dramatically the opposite. Like we are just scratching the surface of token consumption globally, even though we do need and you know, companies will weed out certain examples of token maxing. So we did this survey of developers and we asked them how many of them had a CFO who was telling them to spend less on consumption versus more. And we actually found that seven times more companies are being told to let it rip and spend more. So I think the overall trend is towards a lot more consumption. But yeah, I mean, the examples of over consumption out there are a little bit ridiculous and those will be curtailed. I think the overall trend though, is a wave to the positive.
- [43:38]
Miles
I think part of the dynamic is that the capability frontier is advancing so rapidly, week to week, month to month. You can do way more today on AI, leveraging AI than you could even like three months ago. And so I think it's a hard thing to say. We're still in the early phase of people discovering the power of AI and there's so much more upside to people building on AI and standardizing on AI and like incorporating that deeply into their workflow flows than like saving on the edges. In terms of optimization, I think we'll get to that point, but I think we'll see that when the capability frontier starts to plateau a little bit and we enter a more mature phase of
- [44:21]
Molly
the game, bullish or bearish on half a billion dollars in token spend a month,
- [44:29]
Matt
I'm very bullish that we're going to go well above that.
- [44:33]
Molly
Really?
- [44:33]
Matt
Yeah.
- [44:34]
Arun
Wow.
- [44:35]
Matt
Very. I think there's a reality, there's a reality of this that like the amount of indigestion we're going to have related to token maxing is purely predicated upon the capability frontier as a rune set. And so if we stop, if you believe that we're going to at some point asymptote intelligence against these models, then we're going to have a lot of indigestion and 500 billion isn't going to happen. I don't think there's a lot of data out there that shows that capability improvement is slowing. I think the adoption is very early days. There are people that are on the extreme end of that in token maxing for sure. But it's buoyed by the fact that the capability frontier is rapidly expanding. And when you expand outside of what I would say is probably a very, very, very small percent of companies that are truly consuming tokens and truly leveraging AI for what it can do today. And you broaden that across the ecosystem of enterprises, prosumers and consumers. The token side of things is going to be. I think it's going to be just like every underestimated infrastructure forecast. We're going to spend X and we always spend X plus some multiple of that every single quarter everyone revises up and you're going to see revisions up on tokens for sure.
- [45:47]
Molly
Do you think it'll ever get to a tipping point?
- [45:51]
Matt
No, it's a philosophical point. Because like at some point, if you go so far, you're talking about machines running a lot of things and you know, you can go as far as the Elon point of view where we need to harness the sun's energy to be able to create as much possible infrastructure to support this token consumption. Maybe that's too far, but it's only going as far as the value it receives back, right? And so there is going to be a governor against it if we don't see value back from it. Now, extremely far is where AI runs a lot in our lives and much more, much further and much more penetrated than what we see today.
- [46:24]
Molly
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- [48:20]
Matt
I mean, I think it was a huge, huge win for Elon to lead the charge and get SpaceX into indices early. Whether or not you believe that's right or wrong, it was a huge win to be able to help buoy some of the float that's going to hit the market. And that to me is far more important than what happens in the next six months. And maybe that's us wearing our long term investor hat and thinking about things over many horizons rather than some sort of near term return threshold. So could it be rocky in the early days? Possibly, but I don't think, what I don't think is rocky is the business models that are behind those companies. And I do think that if anything, you know, I would want to be long term holders of that basket over, over many generations.
- [48:59]
Miles
Well, first of all, I think it's a really good thing these companies are going public and there's a bit of a race to get out. If you look at the retail market in general, they haven't had their mom and pop investor, they haven't had a chance to participate in this incredible part of the cycle till now. And so Elon reserving 30% of the SpaceX IPO for retail investors, I think is a really great thing. It allows other people to invest in this movement as well. And I think it's a little bit why we're seeing what we're seeing in broader culture revolt against AI data centers. It's because culturally in our society we've created this haves and have nots and now everyone could participate in it. So I think that's a really good thing. I think too, to Matt's point, there absolutely is value creation here. And so as that becomes more clear and as these companies go public and they have to report their financials and their growth and everyone sees the phenomenal ramp that these companies are on, I think everyone is going to see the power of AI and so I think that's also a really good thing. And so I think this is just the power of the financial markets in the United States specifically. I think we can absorb it. I think we will. I think you'll see a number of other countries and investors from all over the world and mom and pop, you know, it's not going to be a smooth up and to the right, but it's a really great thing that I think these companies are going to finally come out and everyone's going to be able to participate.
- [50:27]
Molly
Miles,
- [50:30]
Arun
sorry. Those are two tough acts to follow. I think there's some of the uncertainty around how these companies will price and trade in the early days. Reminds me a little bit of the 20, 20, 2021 sort of dispute about direct listings versus IPOs. I do think there's a lot of unknowns about what the first 60, 90, 120 days will look like. But I do absolutely agree with Matt's point that over the next several years, I think this basket of companies will be incredibly valuable. And I agree with Arun's point that it's really good that retail can finally participate.
- [51:04]
Molly
Okay, so as we close out, I mean, that was a really optimistic place to end, but we're not done yet. What are you guys?
- [51:14]
Matt
How many Lunin bottles?
- [51:16]
Molly
What are you guys most looking forward to in the next 12 months, if you can think that far ahead?
- [51:22]
Matt
I personally, and this is kind of piggybacking Arun's point, but I personally am very excited to start putting some wins on the board for the world of AI outside of our small little bubble here in the Valley. And I totally empathize with the indigestion, frustration, concern around what AI is going to do and grasping onto all the negative scenarios that can play out from here. And I think in part it's because we just talked about token maxing. The reality is only people on the far, far frontier of leveraging AI today are really getting tangible value out of it. And that's changing rapidly. I'm very excited for that to disperse well outside of the Valley. And I'm very excited to start getting phone calls from friends that don't work in technology, that typically don't talk to me about my day job, aren't mad at me for my day job to start to say things like, wow, this major efficiency unlocked in my life, or this was fantastic from a health perspective, because I know someone in my family that's affected by this particular condition and it was untreatable or drugs were struggling to get through trials. And now that's changed and that's not going to maybe happen in 12 months. But I hope we see green shoots of it because we really need a narrative shift here around what we see day to day and where we see this going and what the public actually views as the risks of AI.
- [52:46]
Miles
I'm going to piggyback on that answer because, well, I like it. And my wife is an ER doc. She works at San Mateo Medical center, and she recently implemented a product that I introduced her to, an AI company that takes and optimizes the triage process, which is when you check in, how do you rank people in terms of the severity of what they're showing up for and then match them to the proper care? There's a ton of slack in that process. And the early results from implementing this is that it made them 100% more effective. When you think about that, when there are lots of people that show up to our ER that don't have health insurance, they show up there for their primary care, they show up there with some emergency. If you can be twice as effective using this in the very early innings, before any of this stuff is optimized, just think about the promise. That's one specific use case in one specific industry. And you think about this across all the industries that exist. Retail, manufacturing, you know, some of the frontier categories that we're looking at. I. That's what, that's what gives me confidence about the overall, like, opportunity set that we're about to see. And so I think that'll just become more clear in the next 12 months.
- [53:58]
Arun
I completely agree with this concept of real world AI applications that make life better for average people. I think, like, that's something to be really excited about. I'm actually going to take your question in a slightly different direction, something that I'm excited about over the next year to bring it back to sort of the Excel viewpoint, watching some of the younger members of this team thrive. The generational continuity here extends from the partner role to the associate role. We have some people that have been here for a decade, hustling, practicing the craft, getting smarter every day. They've led some really, really exciting investments that aren't quite yet known. And I think we have some rising stars that are going to really, really hit their stride and be known to the world in the next couple of months. So Ben Cuazzo, Christine Esserman, Gonzo, Josh Fang, Rohan, so many people on the team that are just really, really huge, important contributors. I'm excited to see them get some, get their flowers.
- [54:58]
Molly
Damn, those are all really great answers. What a sentimental one.
- [55:02]
Matt
I know.
- [55:02]
Miles
Oh my gosh, I'm the sentimental.
- [55:05]
Matt
All the associates are gonna work for Miles this week. I'm gonna have no chance.
- [55:08]
Arun
Except the ones I actually accidentally left out.
- [55:11]
Molly
Well, Arun, Matt and Miles, thank you so much. This was so much fun and hopefully we can do this again soon.
- [55:18]
Matt
Thank you Molly.
- [55:18]
Arun
Thanks for being here.
- [55:19]
Molly
Thanks. Hey it's Molly. If you enjoy our interviews, check out our newsletter Sorcery VC where we deliver a once a week top deals and tech headlines. Email and also go deeper on our podcast interviews. Subscribe to Sorcery Today and don't forget to subscribe to the podcast on YouTube, Spotify, Apple or wherever you listen. Link in Description to sign up.