← The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
20VC: a16z's David George on How $BN Funds Can 5×, Do Margins & Revenue Matter in AI & the Most Controversial Bet at a16z
01:06:37
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- [00:00]
David George
Our best performing fund in the history of the firm is actually a $1 billion fund. If you overweight the fear of future theoretical competition, you can always talk yourself out of making an investment. The number one way to measure a company is ultimately return on invested capital on the gross margin point. Today I'll say this, we give a little bit more of a pass than we used to.
- [00:24]
Harry Stebbings
At what point does the entry price, do you think, for OpenAI become not.
- [00:28]
Podcast Host
A good use of dollars?
- [00:30]
Harry Stebbings
What I just don't understand that I would is flo. Can you help me understand flo? Because I think the world kind of scratched their head. Why did it make sense to you when it didn't make sense to anyone else?
- [00:42]
Podcast Host
This is 20 VC with me, Harry Stubbings, and I'm so excited for the show today. This guest is a dear friend, a longtime friend, and so I was hurt even more when he did a competitive show recently with another podcast. I was so pissed off, I actually said to him, listen, we'll do our show, but it's going to be spicier than normal. I'm not going to go easy on you and you're gonna have to put up with it. And he said, fine, let's do it. And so today we welcome David George. David George is a general partner at Andreessen Horowitz, where he leads the firm's growth investing. His team has backed some incredible defining companies of this era, including DataBricks, Figma, Stripe, SpaceX, Anduril and OpenAI. He's now investing behind a new generation of AI startups like Cursor, Harvey and Abridge, to name a few. But before we dive into the show today, are you drowning in AI tool, chatgpt for writing, notion for docs, Gmail for email, Slack for comms, and you're constantly copy pasting between them all, losing context and losing time. This is the AI productivity tax and it's killing your output. At 20 VC, we're all about speed of execution and Superhuman is the AI productivity suite that gives you superpowers everywhere you work. With the intelligence of Grammarly, mail and coda built in, you can get things done faster and collaborate seamlessly. Find finally AI that works where you work, however you work. Superhuman gets you from day one with zero learning curve and it's personalized to sound like you at your best, not like everyone else using generic AI. Get AI that works where you work. Unlock your superhuman potential. Learn more@superhuman.com podcast that's superhuman.com podcast and just like Superhuman gives you superpowers in your inbox. Fanta gives your company superpowers in security and compliance. Customer trust can make or break your business. And the more your business grows, the more complex your security and compliance tools get. It can turn into chaos. And chaos isn't a security strategy. That's where Vanta comes in. Think of Vanta as your always on AI powered security expert who scales with you. Vanta automates compliance, continuously monitors your controls and gives you a single source of truth for compliance and risk. So whether you're a fast growing startup like Cursor or an enterprise like Snowflake, Vanta fits easily, easily into your existing workflows. So you can keep growing a company your customers can trust. My listeners can get $1,000 off Vanta by going to Vanta.com 20VC that's V-A-N-T-A.com 20VC 20VC for $1,000 off Vanta. And like Vanta builds trust with automated security. Angellist drives momentum by helping you find and fund breakout startups. If you're listening to 20 VC, you know we have a really high bar. Well, Angellist is the modern platform used by the best in class venture funds where over 40% of top endowments and banks are LPs. Their customers include a top five venture firm, 20VC and they now have, check this out, $171 billion of assets on the platform. They combine an all in one software platform with a dedicated service team that moves as fast as you do. One manager said this awesome quote, angellist feels like an extension of my fund. Another said angellist gives me total peace of mind. The attention to lightning fast response time and just real sense of ownership from the team are exactly what I need to stop worrying about back office ops. So if you're starting a new fund, don't be a moron, just use Angellist. They're incredible. Head over to angellist.com 20vc to learn more.
- [04:32]
Harry Stebbings
You have now arrived at your destination. David. Dude, I am so excited for this. I've been looking forward to this one for a while and I feel like I'm extra prep now. I've just listened to you on Invest like the best. So I'm ready to. I'm ready to go dude.
- [04:46]
David George
Let's do it.
- [04:47]
Harry Stebbings
I actually spoke to most of your partners beforehand and they said to me that I had to start with a show that we did with Everett Randall. Everett Randall said on the show that you cannot look LPs in the face and tell them you'll do a 5x with the fund sizes you have, how do you think about responding to the notion that one can't say to their LPs you'll do a 5x with large funds.
- [05:12]
David George
Well, Harry, it is great to be back with you. I love hanging out with you. So I'm glad we're diving right in. Yeah. As it relates to fund sizes. So our funds consistently beat small, large, diversified, concentrated venture funds. So our larger funds have outperformed our smaller ones. And our larger ones actually have similar multiples of money to our smaller ones across strategies. So I would start by just saying this. In venture, we have two customers. We've got the LPs and we have the founders on the LP side. Money is going to flow to where the highest returns and best, worst reward are. And so I think our fund sizes are a reflection of that. Our best performing fund in the history of the firm is actually a $1 billion fund. So it's a large fund. In that fund, Databricks has returned 7x the fund so far. Coinbase has returned already DPI'd 5x of the fund. In that fund, we also had GitHub, Digital Ocean, Lyft and many other things. To me, you can kind of see it in the data in our returns already. It's about the number of winners you capture and if the big ones are great, that can really work out. So I think the idea that large funds can't have great returns is just not true in our experience. So private markets have changed. Tech waves create bigger opportunities. So let me just talk about each. The private markets have grown 10x over 10 years. Right. It's over $5 trillion in market cap. Now, in our market, we actually just looked at the 50 top IPOs from 2017 to 2025. And if you disaggregate where the dollars of return come from, 47% of the dollars of gain happens between the C and the series B. And 53% of the dollars of gain happen from series C. Plus, I was actually surprised when we looked at this, but there's a tremendous amount of dollars of gain that happen at the later stage. And that's 17 to 25 IPOs. That actually skews a little bit heavily toward when companies were still going public, when they were smaller. So the size of outcomes, you know, is huge. Again, we've got 5 trillion of private market cap. If you look at our LSV funds, the aggregate market cap in those funds has ranged between 700 billion to 1 1/2 trillion. So there's just large companies and if you apply ownership assumptions to that relative to generating 3x or 5x returns, it's pretty manageable. So that's the private market and the conditions that have changed, and we can talk a bunch about that. Tech waves tend to create massively different value. I mean, this is very well covered, but the big story of Mobile, Social, SaaS, Cloud, E Commerce all at once was 20, 25 trillion of market cap creation. And if that started from scratch today, given the public private market dynamic that I just described, so much of that value creation would take place in the private markets. So we're in winning inning one of this new big tech wave. I never would have expected in the last wave that companies like Salesforce would be worth $230 billion or ServiceNow would be worth $175 billion or CrowdStrike $130 billion or DoorDash $100 billion. But here we are, and if you look at what's happening in the private versus public markets now, the size of the winners from a new tech wave that's going to happen in the private markets.
- [08:11]
Harry Stebbings
With the extension of private markets, are you worried that essentially companies are not going out for so long that they are getting competed by new private companies before they get a chance to get out? You can look at the dynamic between Axon and Flock Safety is a good example of that, where, like Axon is like eating away at part of Flock Safety's business, where they replace them in Atlanta, a core part of Flocks business, and both are private and they're eating away at each other in a world where one of them would have gone public in that time in a traditional world.
- [08:41]
David George
Yeah, I don't, I don't think that whether it's public or private has much to do with the competitive dynamics, to be honest.
- [08:47]
Harry Stebbings
But it does in terms of liquidity for venture investors, like.
- [08:51]
David George
Yeah, well, we, you know, we've led three rounds in Flock Safety. We led their last round too. And so we're still quite bullish about Flock Safety. You can talk about the increasing competition with Axon. The real story of that one is that the market is actually embracing technology now, finally. And so it used to be that historically selling into law enforcement was a terrible category, and now it turns out that it's a wonderful category. If you actually have the most compelling products, you can get tremendous amounts of market share. And so I don't worry about that dynamic at all. You know, frankly, I think the more some of those companies have stayed private, it's been to our benefit because we've been able to increase our ownership over time.
- [09:30]
Harry Stebbings
Are you able to take money off the table with the extension of private markets, given how big a name you are and how big a position you often have? You're just a big piece of a cap table for someone like me. It's much easier to sell out in a later round.
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Podcast Host
Are you able to.
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Harry Stebbings
And do you have that discussion internally of hey, we should take chips off the table now?
- [09:47]
David George
We could, but we historically have not. You know, for the most part. For the companies that have decided to stay private, we've been really excited to stay in them, keep backing them, and that's probably the strategy that we'll continue to have. You know, I think this staying private dynamic is a little bit overblown because I think there's some idiosyncratic reasons why certain companies have stayed private. Many companies, many CEOs that I talk to, they are very happy to be public or they're excited to go public. You know, I tell our CEOs all the time, I've been fortunate to work with a bunch of public companies. Never one of them has said, I regret going public. I think for most of the companies that we're talking about, they'll wait longer than they had historically, but they will still end up going public.
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Podcast Host
Seriously?
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David George
Yeah.
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Harry Stebbings
I don't mean, I don't mean that horribly. I don't meet many public CEOs who don't tell me they wish they were private.
- [10:37]
David George
No, I mean, look, I think there's tremendous benefits to being public now. There's huge benefits for being private as well, which we can talk about. But you know, you could look at many of the public companies that are out there that had difficult paths and, and they would say, you know, they wouldn't trade it. Right.
- [10:52]
Harry Stebbings
Can you genuinely, can you tell me what those benefits would be of being public?
- [10:57]
David George
Easier. It's easier access to capital in some cases. So there are select few private companies that have very easy access to capital in the private markets. I think there's a trade off in the private markets where you actually have a more expensive cost of capital, even if you have access to a lot of it. I think you can get a cheaper cost of capital in the public markets. It's a little bit.
- [11:17]
Harry Stebbings
Do you think you can still get a cheaper cost of capital in Publix? Like Publix to me is more expensive, say privates. We've given more elasticity on price today.
- [11:26]
David George
To me.
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Harry Stebbings
No.
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David George
Oh, I don't think so. I don't think so. The companies that we've invested in. I'm very excited about them in the private market and I think if they.
- [11:33]
Harry Stebbings
Were like when you look at a rapid or a lovable price where it is, it's like price at the same price as Wix. And Wix is doing 2 billion.
- [11:40]
David George
Yeah, I'm not close enough to those to know. I don't, I don't follow those.
- [11:44]
Harry Stebbings
We're not, the comps are very, very sharply contrasting. What we're saying that, that actually public is harder and privates a cheaper cost of capital.
- [11:52]
David George
Yeah, look, we're not close to those companies. I'm not close enough to know how they're valued relative to their performance. I can say in our portfolio, the companies that we have invested in over the last year or so, I'm pretty confident that if they were in the public markets they probably have access to capital at a cheaper cost.
- [12:09]
Harry Stebbings
I always remember watching, I think it was John Collison say like, oh, I'm not going to do the accent because I'm shit at accents which is why I'm not an actor.
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David George
You already have the good one, you don't need to mess with it.
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Harry Stebbings
Stop it. Sorry. Too kind. And I don't want John to unfriend me but he was, I don't understand why I would go public. I don't need some like 25 year old associate to tell me that I need to you know, plan more efficiently.
- [12:34]
David George
Yeah, for certain companies, like it's a huge benefit, you know, for somebody like Stripe that can get a pretty liquid, you know, market in the private markets. I get it. For them I think the biggest benefit is not so much that because I think in the fullness of time, if you're transparent, you tell, tell a good story you share with the public markets, they'll kind of understand your business. I think the biggest advantage is the avoidance of volatility in your stock price and sort of employee management. You know, if you can kind of steadily grow or control your stock price in the private markets, even if it's a slight discount to where you would be in the public markets. I get the benefit of that for sure. We've seen some of our companies that have, have been able to do that. Right. Stripe, SpaceX, Databricks, you know, it's worked to their advantage for sure.
- [13:17]
Harry Stebbings
Is there anything else that you think is complete bullshit or that people don't see about the extension of private markets and the opportunity that's opened up for fund sizes like yours with this extension?
- [13:28]
David George
I think the biggest thing that's missing is just the change in what that means for asset classes. So it used to be that you could get access to great companies in the public markets that are small cap. It turns out that's fewer and further between now. We just did an analysis on this. I mean it turns out that the number of public companies has been cut in half over the last 20 years. You know, the companies that we're talking about, many of them would already be in the public markets and they're not. And so you know, if you look at where the returns are getting generated, the returns are actually getting generated in the private markets before they go to the public markets. And now if you look at what remains in small cap land in the public markets, there are definitely some high, high quality companies, but the quality has deteriorated. A friend of mine just shared this analysis with me that that showed the return on invested capital of the Russell 2500 over the last 30 years. And if you look at the ROIC, which to me is like the easiest measure of the quality of the company, it's gone from 7.5% steadily down to 3% more than cut in half. And that's a pretty steady decline. I mean it ebbs and flows with economic cycles. So I think the biggest thing that's missing, and it's probably a reality that we have to adapt to and how we run our business, but it's also a reality for institutional investors in the LP community that the asset class is no longer bespoke small thing. It's like the grown up leagues. You know, it's the big leagues. Like if you just look at the size of the private technology, high quality companies, it dwarfs the size of private equity technology in the US That's a major shift and we've had to adapt our business to it in a big way. Right. Like if the companies stay private longer, we got to give them new stuff. They have to be multi product, they have to be multi channel, they have to be international. And with AI it's happening much, much faster. So we've changed our business as well. But I think the market reality is just historical views of what the asset classes are do not reflect what they actually are today.
- [15:21]
Harry Stebbings
Completely agree. So I'm an institutional investor with a $10 billion endowment fund. How should I change my asset allocation between P Venture publis, given that blurriness, merging lack of clarity that you just mentioned, what would you genuinely advise me?
- [15:40]
David George
I'm heavily biased and you know, look, I, I recognize that many of the endowments have a starting position which Is, you know, I think many have probably find themselves a little bit overallocated to, to privates. And so I don't know how to assess that relative to the future outlook. But if I take the future outlook only, where do I think are the most attractive opportunities at? Like if you just start with where the 10 most valuable companies in the world are today versus 25 years ago. Eight of the top 10 are US West coast based technology companies and they were venture backed. If you assume that the future is likely to be something similar to what's happened in the last 20 years, I think the most interesting place to be is this asset class which has exposure to what those next generational kind of dominant companies can be. The allocation should reflect this sort of melding of what used to be part of the public markets that no longer is. That's sort of a newer asset class. And so that's one piece of it. My friends in private equity do an amazing job. They have incredible returns.
- [16:43]
Harry Stebbings
Do they have better returns than you?
- [16:45]
David George
If you were to look. My compliance guy doesn't let us talk about returns. But if you were to look at our returns or the top performing venture funds, let's just call it that relative to, you know, top performing PE funds, the top performing venture funds. Outperformance. That's historical. But I think it's going to be more extreme in the future because I think AI and the effective implementation of AI is going to be the most important thing for companies over the next 10 years.
- [17:09]
Harry Stebbings
There's so many things that I want to talk about. You said that 8 out of the 10 are us. Candidly. Would you be like, ah, don't worry about Europe. If you have a us covered, you've got eight out of the 10, you've got dominant market share. Silicon Valley's retain the title as AI Center. Obviously I'm in London, I'm not going to be offended, but is that what you would say?
- [17:27]
David George
No, not at all. I mean there's great entrepreneurs in Europe and we've backed a bunch. Right. Like we backed Matty from 11 labs and he's doing an extraordinary job building what we think is a generational market leading company. You're shaking your head.
- [17:40]
Harry Stebbings
Yeah, I turned it down at Seed. You can't, you can't, you can't, you.
- [17:45]
David George
Can'T bet a thousand, dude.
- [17:47]
Harry Stebbings
Another one of yours. I turned down AT Seed. That keeps me up every day, every day.
- [17:51]
David George
Deal. My favorite thing about deal. I mean Alex is just absolutely relentless. So I, I recently, I had some post, I think it was, you know, an announcement of something, you know, that I posted on LinkedIn. Somebody had commented. A CFO of a growth stage company had commented on it. And I immediately get a screenshot from Alex circling the comment. And he said, can you introduce me to this guy? He looks like a great deal customer. And I'm like, man, this guy is always selling in a market like that. Like that is exactly what you need. I love it, dude.
- [18:23]
Harry Stebbings
I pinged him on a Sunday morning and I said, hey, a Project Europe company, this is like very young founders under the age of 25 with no employees, wants to be a deal customer. Who's the lowest person on your team? I should introduce. Who should I introduce them to on your team? Me. You can do it now, please. I'll take the call today. I was like, dude, it's like this one person, he's, I'll do it. School to meeting.
- [18:44]
David George
It's actually amazing. He's relentless and you know, look like this is very much the kind of founder that I love.
- [18:50]
Harry Stebbings
I agree with you. One thing that I do worry about when we look at this stage of the market, especially when it comes to this price, is that we're like taking venture risk in terms of probability stage of company, but at prices that were previously very, very mature companies. How do you think about that? Taking venture risk at super high mature company prices?
- [19:11]
David George
I think there are certain instances where it makes sense. I mean, I would agree with you that there are many instances in the market where that doesn't make sense. There are certain instances where some degree of likelihood of success is very, very, very high despite a very early stage. And so as an example, my partner Sarah led around in character AI and it was extremely early stage and we invested at a, you know, what you would call a growth stage price. But we knew that the likelihood of some degree of success in backing Gnome was extremely high. You know, it worked out that way. And so for, for extremely, extremely special people like that, we're comfortable to step into those situations.
- [19:53]
Harry Stebbings
So would you argue for deals like that? Actually the risk is not the entry price because you've got the liquor, which means like someone like Norm, he's always going to get bought for whatever the liqu. Profits, like whatever 100 or 200 million.
- [20:05]
David George
Obviously, yeah, we almost never make an investment saying like, oh, we've got the liquidation preference. But there are certain situations like that where we feel like it's pretty asymmetric backing Gnome. You feel like there's a pretty safe downside and there's an extremely High upside. The kinds of people, I say people because some of these are earlier stage people. Best. The kinds of people like that that warrant an investment decision. A thought process like that I think are extremely small. I mean the list is five people.
- [20:35]
Harry Stebbings
I spoke to Brian Kim on your team and he asked me, do you see as part of the growth funds charter to fix the errors of omission from your venture team?
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David George
Very much so. But we do it in partnership with the early stage team. So this is like our whole model, right? We talk about mistakes we make all the time and we have some very, I have very painful errors of omission at the growth stage too. If you think about what our business is, we're never going to have at the early stage, 100% market share of all the best deals by having a growth fund. We can come later. We call it like the fix the mistake fund internally when we're joking around. But we do that in close partnership with our early stage team. So we always join team meetings. We're always talking to each other. What are you asking the early stage team, hey, what series A's do you wish you had done that you passed on? Which seeds do you feel like you passed on? And so when you have a situation like what you described with Matty pulling your hair out that you, that you didn't do the seed, you know, that's okay, come back and you know, come back and fix the mistake at the B or the C. And so it's a huge part of our charter. By the numbers, about half of what we do is follow ons from existing venture companies. And then from a dollar standpoint, another 15% is follow ons from existing growth stage companies. And then about a third or so is fully net new companies. And when we're doing the fully net new companies, we have a pre existing relationship with those founders from the early stage every time. And so definitionally, can you just tell.
- [22:03]
Harry Stebbings
Me on the 50 and 15? 50 is follow on. But 15 is what follow on of.
- [22:08]
David George
A different kind of an originated growth fund investment. The thing that's important about that is, you know, when we invest, I don't know, two thirds of the time it's into a company that we have a preexisting relationship with either at the early stage or the growth fund. So the 50 is, you know, we did the 11 labs growth round and we, you know, thankfully Jennifer and Brian did the early stage round. The 15 would be we led two more rounds in flock safety or we led another round into Figma or we Put more money into SpaceX. So something that was originated, you know, or Waymo. Something that we originally did out of the growth fund.
- [22:43]
Harry Stebbings
What did the venture fund do that you didn't double down into that? With the benefit of hindsight, you're like, motherfucker, we should have done.
- [22:51]
David George
Oh, man, there's many of these. I mean, we don't. We don't get it right all the time. I think the most relevant are like, we passed and then we ended up fixing our own mistake. You know, for example, you know, with Deal, there was a round in between when Anish led the Series A and then we co led the Series C. We obviously wish that we had done.
- [23:09]
Harry Stebbings
That, but what do you learn from that? Yeah, I have this too. I actively like, what do I learn from missing 11 labs from missing Deal. My takeaway is very simple. I thought I was smarter than markets. I thought I could forecast what OpenAI's product roadmap would be in the case of 11 labs. And actually, I should have just 100% backed up the truck on Amazing Founder. Same with Alex at deal. Payroll, ADP, paychecks.com, but Alex is amazing. What was your takeaway from missing that B? Which is. Is a mistake.
- [23:37]
David George
Often the takeaway is when we make an investment, we should always be investing in strength of strengths as opposed to lack of weaknesses. And so this is a philosophy that comes from Ben. If you have spiking strengths in a founder and a company, it's okay if there are weaknesses or concerns. Often the mistake will manifest itself as the fear of future competition, like the fear of theoretical competition. Right. So that's. That's the perfect articulation of what you just had for 11 labs and say, oh, my gosh, aren't the labs going to do it? It's the old VC trope of, you know, well, isn't Google going to do it? Or what happens if Facebook does this? If you overweight the fear of future theoretical competition, you can always talk yourself out of making an investment. And so we try really, really hard not to do that. Other mistakes, if we pass on great companies, it's not because they're the market leader. It's not because they have a good business model. It's because we think the market might be too small. Those are mistakes, too. Like, we always underestimate the size of a market. And we have fun stories about that all over the place.
- [24:45]
Harry Stebbings
We do, but it's just certainly I just did a show where the guest talked about the TAM trap, which is like, why SaaS is like Japan, which is like shrinking population, shrinking seats and actually tams being smaller than we thought. And whether it's your dropboxes or your Twilios or your pager duties.
- [25:00]
David George
Yeah, look, I, I think many of the incumbents, I call them the new incumbents and the new incumbents are in much better position, I would say, than like you know, licensed incumbents. When SAS came along. If I were to rank order the level of disruption that is coming for these companies, business model shift is number one. And so we can talk about examples where that's most in practice today. You know, Sarah and Kimberly from our side led investments in Decagon. Customer service is the most obvious one where you can certainly price based on completion of a task. It's better, faster, cheaper value, props the customer. So if you are going to compete with a seat based customer service thing, look out, that's hard. And that's a business model shift. So that's like the most disruptive piece. The second most disruptive piece I would argue is UI and workflow. And then the third most disruptive piece is access to data. So what data do you actually access? If you have all three of those that undertake major change at the same time, I think you've got a really good chance for a startup to come and beat the incumbent, the new incumbent, if you will. At the same time I just never in a million years would have thought that the big software companies could be as large as they are. And so I have to think that this next wave probably presents the opportunity for this next generation to be much larger than the, than the previous generation. And it doesn't mean that they have to go eat all labor. We have that on slides too. But I don't think in practice that's actually what happens. I think in practice what actually happens is there's massive surplus that gets delivered to end customers and you can still create much bigger companies than the previous generation.
- [26:43]
Harry Stebbings
I do think it does go back to this great question though, which is like we have to see the transition of spend from human labor budgets to technology budgets because if we don't then the TAM for technology spend just stays the same and we've all just overpaid a shit ton.
- [26:57]
David George
So the only flaw in that logic is that has to be product driven, not top down driven like that needs to be pulled from the market. That needs to be slapping the customers in the face that there's the value prop for them to go do that. As opposed to CIOs or CEOs saying we need to do AI stuff and so let's shift labor spend. I would say there's some encouraging data points. If you look at recent earnings reports, there are a couple of companies and you gotta like look kind of deep for these, but there are a couple of companies that have started to show signs of actually running their business differently and showing really high ROI from AI. So do you, have you heard of C.H. robinson?
- [27:39]
Harry Stebbings
No.
- [27:40]
David George
It's a truck brokerage. So they take customers who need to ship stuff and trucking companies and they broker deals between the two so that they can ship things. Most of the industry in the US is actually intermediated. It's not direct. Like the, the trucking industry is very fragmented. So this is a, this is a large business. And you know, historically they've had football field sized call centers of people making phone calls and connecting dots. They just disclosed in their last earnings that they saw a 40% productivity increase measured in shipments per person per day in their core business since the end of 2022. 40% increase. And it's AI driven. And so what's actually happened is their operating margin has gone up 680 basis points like that's very effective implementation of AI. And so people always ask, they're like, oh well, is there real usage? Are we in a bubble, all this stuff.
- [28:37]
Harry Stebbings
But that just proves what I said to be true though, which is like the transition of human labor to technology is fundamentally necessary for us to have a great business.
- [28:47]
David George
Yeah, yeah, yeah. And I think it will happen. I think will happen. I'm saying you're seeing green shoots. I don't think it necessarily means that every SaaS company is doomed, but you know, even Microsoft has reduced their headcount by 6% over the last year or so.
- [29:01]
Harry Stebbings
I do think it means you're going to tap out though. You know, sadly I'm a big shareholder in Monday.com in duolingo. And you know, one of our recent guests who's a dear friend of mine is like, yeah, but there's exactly, exactly the problem. There's no human labor replacement there. And unless you have a human labor replacement story in public markets today, you're not going to get the premium.
- [29:20]
David George
Yeah, and I think that, I think we'll see that and I think we'll see that. And I think it will come with a business model shift. You know, you're talking about the public markets. Like in the public markets today, you are guilty until proven innocent. It's the full flip side of our criminal justice system. You are assumed that you are doomed by AI unless proven otherwise. I think there's probably opportunity. I mean you can see the, the way the, the stock prices have gone. I don't have to play in that world. We get to bet on the thing. But I do think that, you know, there's going to be a huge opportunity to shift that.
- [29:48]
Harry Stebbings
Speaking of like the huge opportunities, some companies are taking advantage of them. And the revenue scaling, dude, is just so much faster than any of us have ever seen before. We see the race to 100 million. ARR. I think you guys just did Gamma. Awesome product grant scale very fast to 100 million. Does revenue mean as much as it used to when it's gained so quickly and also seems so transient?
- [30:11]
David George
Okay, so this is a great question because I think this is where you have to be really discerning in the market. It does mean the same as it has before. If it is high retention and high engagement. The bar has actually gone up significantly for us when we look at AI companies because they've grown so fast and so you can't actually look at years of renewal behavior, but you can look at shorter cycles of retention and you most importantly can look at engagement. If people are using the product a lot and getting a lot of value out of it, that's a really good leading indicator and we can take comfort in that. But we have spent way more time focused on that than we did, you know, in the previous generation. So what makes companies like Gamma so special? Again, this is one of Sarah's deals. One, heavily organic customer acquisition and two, really high engagement retention. We talked about the engagement retention piece. It's magic when you have ease of customer acquisition. You and I have talked about this before, but you know, this is one of the most impressive things that we're seeing in the AI companies. 11 Labs has this, ChatGPT has this, Xai has this where it's organic customer acquisition or very low cost sales acquisition abridge Harvey companies where like the market is just absolutely starving for their product. That's a really good sign. And so just because it grows really fast doesn't mean it's going to end up transient or lower quality. But the bar for assessing that is way higher than it used to be.
- [31:36]
Harry Stebbings
The bar for other companies is also way higher it seems. And my question to that is, dude, I'm sitting on a lot of great enterprise software companies. I was always taught, dude, that you're going to get great funding if you treble trouble double double Is treble trouble double double dead in this new world.
- [31:54]
David George
I don't think it's dead. In this new world, I tend to think that companies, the number one way to measure a company is ultimately return on invested capital. The way you do that with an early stage company mostly is efficiency of customer acquisition. Not every company needs to go, you know, 0 to 100. Like it depends on what market they're in. But I do think the companies with AI, if there's very sort of starving end customers, high momentum gives you a chance to build a moat. And I think that's the most important thing about this sort of debate about how high of growth is good enough. It depends on the market you're in. In some markets, like, they're not going to move as fast. But in the markets that are moving really fast, if you're not moving really fast, you know, that's a, that's a risky place to be. But I think the most important thing about momentum is just, it's relative to your peer set. If your peer set is growing really fast and your competitor, your direct competitors are growing really fast and it's, you know, high retention and customer acquisition is relatively easy, you need to be growing really fast too.
- [32:53]
Harry Stebbings
But like the opportunity cost of cash is so real. We were talking about this the other day with the company internally. I'm like, I completely agree, it could be a very good way to build a very solid business over a long period of time. But the opportunity cost of my cash is I could be in the next Gamma Harvey Lovable, you name it. Yeah, it's good. But is it the best place for my precious dollars and for my LPs? Precious dollars?
- [33:17]
David George
Yeah. We spend all of our time thinking about like, where is their market pull? Because those are the best places where you can build a company. Like all those companies that you just described, there's extreme market pull. The reason they've grown really fast is not because they've poured tons of money into hiring sales reps. The reason they're going very fast is because there's tremendous customer pool. And so we look for, you know, we look for those markets.
- [33:38]
Harry Stebbings
I believe that king making does exist. And king making for those that don't know is when a financier is able to, to invest so much that they are able to anoint a winner in a category and that then leads to moats and everything that comes with it and ultimately winning. Do you believe that king making exists or do you disagree that it exists?
- [33:58]
David George
As we think about investing in companies, so we always seek to invest in the winner. If the investment thesis is our Investment is going to make them a winner. It's probably a pretty flimsy investment thesis. Now. An investment that we make in a company that is already attracting resources, hiring really well, able to raise capital, well, able to deploy more money into go to market, able to deploy more money into R and D. It can generally help. Like this is the whole theory of preferential attachment, which is why increasing returns to scale is a concept. Even if you're not a network effect driven business. If you're salesforce.com or you know, Workday or ServiceNow or CrowdStrike, the more you become the leader, the more resources come your way and the easier things get for you. Potentially we look for situations like that. I would contrast it with situations like the original SoftBank Vision Fund did a lot of really good things. Honestly, they did a bunch of really good things.
- [34:54]
Harry Stebbings
Like what I genuinely want to be educated here because I immediately shivered.
- [34:57]
David George
They were early to figuring out that there would be a huge opportunity in AI. So they famously were in Nvidia in that fund and they did some really good investments like Slack, like Garden. The one piece of it was missing was that capital as a weapon was a viable strategy. So capital as a weapon in enterprise is really, really hard to do because you physically have to hire people, you have to hire sales reps, you have to hire marketing people, etc. Capital is a weapon in consumer, most of the time it doesn't really work. Like I would say TikTok is maybe the exception, maybe Uber. But you know, the thing that that maybe was wrong about it was we can king make if we just put the capital into the companies and then that will allow them to win. But that's a bit of an adverse selection machine where the companies that opt into that as their winning strategy are the ones that maybe don't have as good of a reason to win or competitive advantage in the first place. And so if that money is going to go back to consumers or drivers or whatever it is, in that case and just get funneled back to Google and Facebook. I don't think that king making for that is necessarily a good strategy, but investing a lot of capital, having a brand that gives a seal of approval, it can definitely help make a company succeed. You know, I think Mark and Ben have described it well in the past. What are we giving to our founders? Partially what we're giving to our founders is, you know, a loan on our brand, you know, a seal of approval. You know, often, especially for early stage companies, it really can help with hiring. Have you heard the talk track of like, what store do you want to be? There's sort of a barbelling of the retail market. There's Amazon and Walmart on the one end and then on the other end there's like extremely high end retail.
- [36:41]
Harry Stebbings
We call that Chanel.
- [36:42]
David George
Yeah, Chanel Zegna. This is where Europe really thrives. Yeah, there's scale players and then there's specialists. And I think, you know, we're obviously a scale player. I think the risk is, is everything in between department stores that have general merchandise but don't have scale, for example. And that's a very risky place to be. So our strategy is very much build scale. And the reason we do that is because it gives a huge advantage from a resources standpoint to our portfolio companies.
- [37:07]
Harry Stebbings
Do you mind being like called Walmart then? I don't mean that rudely, but I love you, dude, but that looks like a beautiful Laura Piano. There's nothing about you. There's nothing about you that screams Walmart.
- [37:20]
David George
We're happy to call ourselves Amazon.com Customers love it. Customers are very well served.
- [37:25]
Harry Stebbings
We're Amazon, we're not Walmart. Okay, gotcha. Yeah, yeah. We mentioned like king making competitive categories.
- [37:31]
Podcast Host
There one I just can't get over dude.
- [37:33]
Harry Stebbings
And I've tweeted this is the customer.
- [37:36]
Podcast Host
Support category because there's just like 50.
- [37:39]
Harry Stebbings
And like Brett and Sierra is obviously like, you know, the OG of OGs of SaaS. Can you help me? Why am I wrong on being so confused by this space?
- [37:49]
Podcast Host
There's just something for every vertical.
- [37:51]
David George
Yeah, well, I think there's a good reason why there's excitement in the space. It's better, faster, cheaper already today with today's model quality, with the reasoning capabilities, you know, with the cost of the models and so you don't need to believe any future state of a different product or a different, you know, model capability. The functionality is there and so there's good reason why, you know, we put on EBCs for our portfolio companies. Every time Decagon appears in one of these EBCs, there's extremely high interest and most of the time conversion to a deal. So I think the market pull, the market size is what is most interesting about that space. If you look at SaaS and cloud markets, about half of them are winner take vast majority, the overwhelming majority and about half of them sort of breakup of market share. So for example, you know, you mentioned deal like payroll market, like payroll market is not a winner take vast majority market. There are many markets like this in SaaS. And Cloud. And so it's possible that Decagon is the winner and they move really fast on product and they win the market based on having the best product and the best distribution and all the things that we talk about. Or it's also possible that, you know, it's a sort of more distributed market, sort of like payroll. Either way, the growth is staggering. The market pull is staggering. Decagon for us is a great company.
- [39:14]
Harry Stebbings
But how do you just think about the willingness to pay up ahead of time? Because that's kind of where you're going, which is that you're just paying so far ahead of time. 10 billion for Sierra is amazing. Yeah, but you legitimately are paying a fuck ton ahead of time.
- [39:30]
David George
Yeah, I don't know. We've not been close to that. Obviously we're existing investors in Decagon, so it's hard.
- [39:37]
Harry Stebbings
But you were decagon. I'm like, how do you get you to say, okay, well if the market continues in this way? Because if you map out expected growth rates, you have to map out with a freaking LSD glasses to see where this lands.
- [39:51]
David George
I'm not sure what I would. I would agree with that actually.
- [39:53]
Harry Stebbings
Okay, I'm taking a company, not decagon, at 50 million in arrow. You have to expect that it will 5x to get to 250 and then 4x to get to a billion and then 3x to get to 3 billion, which is all pretty optimistic fucking growth rates. And then with a 6x in public markets or 7x, we're looking at a what, 3x on the cash, on the price that we're paying today. Wow, that's not a good opportunity. Cost dollar spent.
- [40:23]
David George
I've been historically surprised at how good the best companies can be and how fast they can grow, especially in markets that are early innings with a big technology shift. So I'm very optimistic. Those are abstract numbers. I also don't think that every great high growth company will end up trading for six times in the public markets. There are some that are going to trade higher based on very high growth rates or high cash flow. You know, it's hard to debate like an abstract financial case, but for most of these companies that we've backed, these, these winning apps, they're growing 3x faster than predecessor SaaS and cloud companies. And so sure, high valuations from the outside, I think in many of those cases are warranted.
- [41:04]
Harry Stebbings
Everyone shits on them for margins. Do you think that's a really weak argument to shit on AI apps? And do you think we'll just see the transformation of those margins pretty quickly over the next two to five years.
- [41:16]
David George
The history of technology inputs would suggest the margins will rationalize and the margins are going to go up, up. There's a high amount of uncertainty today. It's possible that this next generation of companies is 50% gross margins. If they're delivering a ton of value growing really fast, that's totally fine. Today the input costs per token have gone down massively. But token usage has also gone up massively with the introduction of reasoning. So in the last year and a half or so, it's been a bit of a muddy picture on the input costs. I think over time that will rationalize will go down. I think the market structure will end up sort of like cloud for the models where cloud costs for the average end customer are fine and you know, cloud's an oligopoly and they make high profits. I think the model companies, you know, that serve APIs will be relatively oligopolistic. They'll probably have reasonably high margins and the end customers will be pretty high served or well served. On the gross margin point today, I'll say this, we give a little bit more of a pass than we used to. And if we ever see a company that pitches US as an AI company and they have SaaS gross margins, we ask a lot of questions. It probably means that people aren't actually using the AI features.
- [42:30]
Harry Stebbings
I do want to ask this dude because I did listen to the show with Patrick and there was something that was interesting or struck me with it, where you said you look for greatness lying where others don't and kind of the art of the pick in determining beauty where it's not obvious. I thought that was kind of interesting. And again, you can shit on me for this, but your biggest position is Andriel Stripe and OpenAI, which struck me as not exactly diamonds in the rough.
- [43:00]
David George
I'm happy to answer it in a different way. Which is what I mean by finding beauty or opportunity is most of the time it's seeing a magnitude of greatness that isn't totally obvious on the surface. And so when we've made original investments in some of those companies, we invested in Anduril in the growth fund when they had one program of record and it was border towers and the bet was can they be massively multi product? And now they have many, many programs of record, some of the coolest products in the market that OpenAI we invested before they had ChatGPT. And so often there's an opportunity where we see things that may be great in the future, even if the companies themselves are already great or hot.
- [43:48]
Harry Stebbings
We said about errors of omission, what era of omission lingers on your mind? What company are you not in that you would most like to be in and why? So like, for me it's Revolut. It actually upsets me every day that I'm not in Revolut. I use it, I love it, but it upsets me.
- [44:03]
David George
I have a lot of errors of omission for current companies. On the model side, Anthropic has done a really great job. You know, we're not investors in Anthropic. They've done a really good job. It's one of those cases where similar to cloud, like if you could own all of aws, Azure and GCP as independent companies, that would suit you pretty well. And again, that's, that's one of those markets that was not winner take all. Even though it's a scale market, you know, it's sort of oligopolistic. If the model companies turn out to be something similar, given how much we expect demand to grow, that's probably one.
- [44:36]
Harry Stebbings
Do you think the market will evolve with like OpenAI winning consumer and anthropic winning dev and B2B?
- [44:42]
David George
Yeah, I think they actually will diverge in pretty meaningful ways. This is sort of what we've seen in historical technology markets. But each will try and remain competitive in their spaces. B2B Anthropic is certainly putting more resource after it today. OpenAI is going to have a really good B2B business. They already do. So I think that market is going to be pretty competitive. Not just coding, but general B2B API usage and moving up into the application stack. Both of them are obviously trying to do that. So I think that market is going to be pretty competitive. Google will play some part in that market. But the big head to head competition will come, you know, between OpenAI and Anthropic. On the consumer side, you know, it's ChatGPT. Ask my family in Kentucky, what do they use? You know, they, they know what, what is AI? They know ChatGPT. They use ChatGPT, you know, extensively. Google's going to take a crack and they already are trying to compete in that market. But you know, brand and the best product in the market can take you a really, really long way. And so, you know, as we have kind of underwritten Future rounds of OpenAI or later rounds of OpenAI, it's very much, you know, with the mind of of consumer.
- [45:50]
Harry Stebbings
At what point does the entry price do you think for OpenAI become not a good use of dollars? This is one thing where I'm permanently reflecting on it myself. If you think it's a $2 trillion company, well, you can still see a 4X from here. @ what point does the opportunity cost no longer make it worth.
- [46:06]
David George
It? We have to constantly reassess this. You should look back at our investment case for investing in Databricks. In 2019, we did an investment out of our growth fund. It was one of our first investments, the largest growth fund investment in Fund 1 at $6 billion. And our investment case never would have predicted what they became. And so we have to constantly push ourselves and think about how big they can become. I've been surprised at how big, in absolute dollar terms the companies can be and how good they can be. So we constantly have to push ourselves on this. The example I always use is Google and Facebook. Ten years ago, Google and Facebook were monetizing their users at like one seventh of what they are today. It's hard to forecast that, it's hard to model that. But it would be limiting to think, you know, you're ever at like an end state of productivity or end state of new products. So, you know, we've been, we've been surprised. We like to invest in the ones where there's a theory on how the core market can be bigger than we would expect or others would expect. You know, Stripe is an example of this. SpaceX with Starlink is an example of this. Waymo, when we invested, is an example of this. And then we also like to invest in the ones where we feel like the founders have an advantage in figuring out the next product. And so Anduril is like a perfect example of this. We knew Border Towers would be a huge product line, but with the team, we were also pretty high confidence that they were going to figure out a bunch of other stuff. I wouldn't have predicted that. They figured out autonomous fighter jets, which is pretty awesome. But, you know, the best ones, the best ones who know their markets, the best who have market leadership, who are product people, who are tech people, you know, they tend to find the next product areas and that's what we.
- [47:42]
Harry Stebbings
Want to find at scale. And at the scale you are. Do you just say, hey, we have to invest in competitors? You can't.
- [47:48]
David George
Not. No, we don't. I mean, when we, when we invest, we try to avoid conflicts as best we can, you know, especially if we're on the board. So, you know, it's the trickiest part of scale of our business. We don't always get it right. There are you delicately do it.
- [48:01]
Harry Stebbings
Between funds and be like, oh, that's in the early.
- [48:03]
David George
Fund. We try not to do that. I mean, look, the thing that we see that more often happens is companies diverge more often than they converge. And so the perception of what a conflict can be in the future often doesn't come into play. There are also examples in the opposite where we funded a company and then they pivoted and they pivoted into a different space. And we try and help the founders as much as we can, even if that's the.
- [48:27]
Harry Stebbings
Case. Kazi, what decision did you and Mark and Ben most disagree on and what was the.
- [48:33]
David George
Outcome? The biggest one was our original investment in Waymo. So we invested in Waymo in early 2020. So we were the only VC fund that invested in Waymo in early 2020. It was extraordinary. I mean, the product was magic even at the time. You know, we did demo rides. This is obviously well before they were everywhere on the road. We did demo rides. You know, it could do. It could drive smoother than a human. They could do unprotected laughs, they could avoid construction sites. They could do all these, like, really special things that you wouldn't think that an autonomous car could do at the time. But at the time, like, they didn't have a product in the market. And I thought the valuation was. Was really high. And so I said, here's all this analysis in our team. And, you know, we produced all this analysis that showed that, you know, the price was really high. And Mark. Mark and Ben were like, it's autonomous driving. What are you talking about? Like, this is the endless market size. This can be the biggest company in consumer technology and they're the market leader. And the way we did it was we invested a smaller amount at the time just given. We were conflicting points of view on it. But that served us well because we kept a close relationship with the team and we wrote a much larger check into their most recent round. And I'm really excited about it. I mean, they have a very exciting future. I'm going to San Francisco after this, and I am going to take a Waymo on the freeway up to our office in San Francisco from Palo Alto. That's sort of a magical product experience. This is one of those cases, you know, we talked earlier about potential future competition. Like, this is one of those cases where there's going to be, you know, tremendous potential future competition. But the product in the market today is magical. And, you know, there was just an op ed written, I think it was New York Times. That was like, it was done by a medical professional. He said, okay, we now have enough data from Waymo that shows they are 7 to 10x safer than a human driver. When we see results like this in clinical trials in the healthcare industry, we fast track the drug into full approval and just get it in the market because the benefits are so great. And he was comparing that to Waymo, which is like, hey, how many deaths are there on the roads per year? It would be irresponsible to block this, let alone not fast track approval of it. It's going to be kind of the mother of all markets, I think autonomous driving and robotics are, are maybe the mother of all markets that are coming on.
- [50:46]
Harry Stebbings
AI. I'm always quite annoyed about it because I always see it on social. And we don't have it in London and I've never been in.
- [50:51]
David George
One. And so they're going to try to get, they'll try to get to London soon. London's a tough market to enter. I mean, you remember what it was like for Uber to enter London in the first place. It got brought into the market kicking and screaming. But, you know, London, Tokyo, they'll be some of the best international markets possible for autonomous.
- [51:06]
Harry Stebbings
Driving. That I understand. What I just don't understand that I would love to, is flow. Can you help me understand flow? Because I think the world kind of scratched their head. Why did it make sense to you when it didn't make sense to anyone.
- [51:19]
David George
Else? You remember what I said earlier about investing behind strength of strengths? Adam has extraordinary strengths. He has some of the strongest strengths of anybody, any entrepreneur in the market. It doesn't mean that he has no weaknesses, but he absolutely spikes in the areas that are most important for the business he's trying to.
- [51:37]
Podcast Host
Build. What would you say those.
- [51:39]
Harry Stebbings
Are? Because I'm not in those meetings and no one is. And I'm fascinated. Where was he? World.
- [51:43]
David George
Class. He's world class at brand building, company building, product hiring. Those sound like things that are, you know, a little fuzzy, but they're not. I mean, they're the most important ingredients for early stage company building. You know, he, he's surrounded himself with an extraordinary team. He's got an incredible insight which I think is fascinating. Obviously, homeownership is declining, you know, rapidly and people aren't able to buy homes. And there's a whole political and social issue with that. But it's the reality of the case the average renter in the US spends 30% of their disposable income on rent. It's the highest amount of spend of any category. And yet it's the only unbranded experience in anyone's life. If you think about, you know, the food you eat, the clothes you wear, the car you drive, you know, the places you go, all of those are branded experiences, and consumers pay a premium for that branded, better experience. You know, his idea was kind of, what if you actually brought brand and a better product experience to a renter's life? There's a huge market opportunity for it. There's a great business model that goes with it. And if there's anybody who can do that, given, you know, the intersection of real estate and brand, I think it's Adam. You know, if you think about the average entrepreneur walks in off the street and pitches us an idea, what is the likelihood that Adam can build a humongous company versus the average entrepreneur? It's extremely high. That's the theory behind.
- [53:05]
Harry Stebbings
It. The founder of Calm, I walk with every week, and he always just asked me one question. He goes, how often do you meet a founder like this? Once a month. Don't write the fucking check. Once every six months, probably. Write the check. How often do you meet a founder like Adam? I don't know. You can answer me on your data set, but it's probably quite rare, in which case you're like, well, then write the fucking.
- [53:25]
David George
Check. Yeah. And it's extremely rare. And Adam is a learner. He is a deep student of the game that he's in. I'm really excited about Flow. Mark and Ben and I are all involved, and Justin from our team, they've sort of proven out the value prop of the product. Now it's just about.
- [53:41]
Harry Stebbings
Scaling. Dude, can I do a quick firearm with you? What have you changed your mind on in the last 12 months? Like, mine was.
- [53:47]
David George
Andreessen. Oh, that's good. I like.
- [53:49]
Harry Stebbings
It. Andreessen nyc YC is the single biggest buy, I think, in venture. Every great European company is a YC.
- [53:56]
David George
Company. Everyone, they've crushed international, like, for what it's worth. I mean, and they. They're really, really good in the US And I, I'm. I'm a big fan of Gary. Yeah. I don't know if it's in the last 12 months, but if you think about the moment that all of the models started to demonstrate their capabilities, there was a moment in time where we thought the models would eat everything in consumer and enterprise software. I think Maybe there's a bit of a shift back toward this in public markets, at least that the models are going to eat all these application software categories. We fully changed our mind. I think there's going to be application software companies built on top of models in pretty much every direction. And so if you look at our investing behavior, it obviously reflects that. That's probably a little bit further back. That's probably more like 18 to 24 months ago. But we sort of all thought at first the models will just do everything and subsume everything. And it turns out there's tons of stuff you have to do around the tasks that humans do in order to build a viable product. The example I like to give, I know it's a lightning round, but radiology AI has been able to do a better job than human radiologists Prior to this whole wave. Neural nets were able to do a better job than human radiologists and looking at scans. And yet since this sort of proliferation of AI, the number of radiologists has actually gone up. It hasn't declined. And so why is that the case? It turns out that radiologists only spend 30 to 40% of their time looking at the scans. There's another 60 to 70% of their time doing all the other stuff. And so the model companies aren't going to go do the work to figure out how to automate the other stuff, the 60 to 70%. But that's what the opportunity would represent for an independent company in that space. Does that make.
- [55:41]
Harry Stebbings
Sense? I know it does and I 100% agree with that. We've got a business called Solve Intelligence which is like patent law AI. No way they're going there. Agree. But OpenAI are doing. I have the nuance of OpenAI are doing customer support. Gemini and Google have just released Build Anything or Build Anywhere or whatever that lovable competitor is called. They are moving into the application layer in ways that we didn't know they.
- [56:06]
David George
Would. Yeah, but it's, you know, it's one of them 30 things in their AI divisions that they're trying to do. It's sort of like how AWS in the cloud, you know, have service offerings for basically everything that you could possibly have and yet there's still tons of infrastructure companies that are.
- [56:19]
Harry Stebbings
Independent. Totally get that, dude. You've met many great founders. One first founder meeting that was most memorable. I'm not asking for the best founder or anything like that. I'm just saying, saying like the most memorable first founder.
- [56:30]
David George
Meeting. Okay, so there are more extreme success versions of founders that I've backed and over time who I've gotten to know. One of the ones that struck me recently was the first meeting I had dinner with one of my partners, Santiago, with Shiv from Abridge. And I didn't know what necessarily to expect. I knew he was a doctor, you know, practicing cardiologist. I knew that he was making a lot of progress in his market. But he was one of these perfect archetypes where he knows his end market, he knows his product, he knows the technology, and yet is a total killer. He's this great bedside man or cardiologist, but an absolute killer. And so I love when I have those first meetings and you can.
- [57:17]
Harry Stebbings
Already feel that he actually reminds me of Winston at Harvey, which is like you feel the authenticity to the core domain, but then it's like not the elegance of that domain. Like the aggression of a tech founder with the academic nature of the core domain. Do you know what I.
- [57:32]
David George
Mean? Yeah, of course. It's actually a really good archetype in a lot of the vertical software categories. But you can definitely see it with those folks. And honestly, speed of execution, aggression is a huge part of success in those.
- [57:46]
Harry Stebbings
Categories. You've got a seed firm, you've got a series A firm and you've got a growth firm that you have to invest in other than Andreessen, which.
- [57:54]
David George
You put your money into, obviously 20.
- [57:57]
Harry Stebbings
VC. Very sweet. Thank you. So I can help you out. So me, I put my seed Hummingbird series. A benchmark growth. Either you or Pat, and I'm not just saying that, but I just think scale is super important and brand is super important. Or Napoleon at Founders Fund, one of the.
- [58:13]
David George
Three. Those guys are all great. I have tons of respect for all those guys. You know, we end up doing rounds together. We're in companies together. You know, I think, I think they're all.
- [58:21]
Harry Stebbings
Great. Who is not in Andreessen? Who you would most like to.
- [58:25]
David George
Work with the best would be, you know, we, we partnered a lot with Nat and Daniel when they were still on the field. And so, you know, if they wanted to actually, I guess they, they were off the field when they're investing. They got back on the field to do real jobs now. But if they were to come back off the field, I think it'd be fun to work with.
- [58:43]
Harry Stebbings
Them. Mine would be Lee Fixel. The guide's ability to predict and forecast markets, like 10 year plan. I think it's really amazing. Or Fenton clarity of thought. Fenton could make a fucking plastic bag seem like it's like made by Jesus. Like, seriously, like, it's amazing. Anything just sounds poetic. Who's the best picker in.
- [59:06]
David George
Andreessen? Oh man, there are a bunch of really, really talented people at the early stage. Like, I love that I get to learn from these people all the time. I think the people at the early stage that have developed the most clarity of thought on approach to early stage investing. I think it's Dixon. He obviously runs our crypto funds now, but he's got a generalist background as well. He's been doing this for a really long time and I think he has the clearest articulation of what our early stage strategy is, which has been adopted, I would say, across the firm, but I think he has the clearest view on.
- [59:39]
Harry Stebbings
It. When you need to win something internally in Andrew's, who's the savage that you bring in to.
- [59:44]
David George
Win? Mark and.
- [59:45]
Harry Stebbings
Bett? You can choose.
- [59:46]
David George
One. They're both exceptional. It depends on what the founder.
- [59:52]
Harry Stebbings
Wants. How does that differ? Love to.
- [59:54]
David George
Know. I'll tell you what, the spikes on both of them from my vantage point, I mean, look, they're both exceptional at every element of the job. Mark can see the future. Mark. If you give mark any 10 year prediction or he will give you 10 year predictions, they're very often right. Like most of the time they're right. And he's often high on magnitude and it ends up being justified in the future. And so things that may seem too high or too crazy, like in the fullness of time, he's generally right. You know, he knows consumer Internet extremely well. You know, he spikes there. Ben is probably the best management coach or understanding of executive dynamics and problems that I've ever encountered. You know, he also is a futuristic thinker, but you know, he, he sort of spikes in that way, you know, and then Mark, Mark spikes in the. In the seeing the future.
- [60:44]
Harry Stebbings
Way. Penultimate one. If you could change anything with Inside Andreessen, what would you.
- [60:49]
David George
Change? I wouldn't change this, but one of the elements about us scaling has been we've had to decentralize the way we run our business. And so when I first joined the firm, you know, we used to sit around in partner meetings all day on Mondays, hear all the pitches from all the various sectors on Mondays and then on Fridays too. Obviously that's not a scalable approach to doing venture, especially given we're in a bunch of different sectors now. But selfishly, at the growth fund side, that was extremely high signal, great information, tons of soak time with all the best.
- [61:23]
Harry Stebbings
Thinkers. Did it not make you A better.
- [61:25]
David George
Investor. I think we have to go out of our way to go get that information and signal now. It actually has made us a better business at the early stage. And then as long as we're coordinating right from early stage through growth, it'll make us better. But we have to seek it out and do a little bit more work to get all that.
- [61:41]
Harry Stebbings
Information. Final one for you, dude. I like tones of optimism. I like happiness. I think there's not enough of it in the world, despite my cynical disposition most of the.
- [61:50]
David George
Time. What are you most excited for on the personal side? I'm really excited. And by the way, these are two areas that I think over the next 10 years are going to be really exciting and really investable, but they're kind of early today. One is personal health, health management. I was with a really talented entrepreneur. Well, he's a former large company executive and he's thinking about starting a company and his extreme version of it was tracking an AI coaching. That happens for you. That explains the trade offs of every decision you make. That's a little bit too extreme. But you know, more proactive, more involved management of personal health. I think it's something that's going to happen. You know, it's one of these large consumer categories that hasn't really hit.
- [62:31]
Harry Stebbings
Yet. Can you imagine wearing a bracelet and every time you picked up a.
- [62:34]
Podcast Host
Cookie it's like heart disease, heart.
- [62:36]
David George
Disease. You just took off. You just took off 17 minutes of your life. So I think that's too extreme. But I do think that there's a positive version of that that could be super valuable. It'd be good for society. But I would love it as a, as a consumer and I think the technology capabilities are going to be there pretty shortly. The other is robotics. You know, we have not made a large investment in robotics, but I think it's going to be the largest category in AI. B2C. B2B. You know, there's still kind of debate on what the right form factors are. Whether it's at home help, whether it's industrial, like all these things. But I do think 10 years down the road we're all going to have like really helpful robotics assistance in B2C and B2B. And so I think it's going to be super exciting as a consumer. But I also think, think as an investor it's going to, it's going to present some awesome.
- [63:23]
Harry Stebbings
Opportunities. I'm going to be honest, I feel pretty guilty because I like, I freaking love you. You're such a lovely, wonderful dude, you really are and I feel like I just battered you with.
- [63:32]
David George
Heart. You went.
- [63:34]
Podcast Host
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