← The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
20VC: Benchmark's Victor Lazarte on Why Portfolio Construction is BS| Why SaaS Spreadsheet Investing is Dead | Why China is a Stabilising Force for the US | Three Traits All the Best Founders Have & The Lie All Big Tech Companies Have Been Telling
01:07:13
Victor Lazarte is a General Partner @ Benchmark, one of the mot renowned venture firms in the world. At Benchmark, Victor has led deals into the likes of HeyGen and Mercor. As an angel, he was the first investor and board member of Brex, and as a...
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- [00:00]
Victor Lozzarte
Big company CEO talking about, like, oh no, AI. AI is not replacing people. AI is actually augmenting people's abilities. Like, this is bullshit, you know, like it's fully replacing people. But then the first question that we ask is, if models get a lot better, is your company worse or is your company better? Like, is there a bubble? Are people getting paid for the risk they're taking? Right. What I'm telling you is in the next three years, someone will start a company that is going to be worth a trillion dollars. So I think, on average, buying the winners today will work out.
- [00:31]
Harry Stebbings
This is 20 VC with me, Harry Stebbings. Now, I heard so many wonderful things about this guest for a long time from Pat Grady, Bruce Dunleavy, Peter Fenton, some of the best.
- [00:41]
Unknown
And so I'm thrilled to welcome Victor Lozzarte to the hot seat today.
- [00:44]
Harry Stebbings
Victor is a general partner at Benchmark, one of the most renowned venture firms in the world. Now at Benchmark, Victor has led deals in the likes of Heygen and Maccor, which recently announced its scale to $100 million in ARR in just 11 months. As an angel, he was the first investor and of Brex. And as a founder, he scaled Wildlife Studios, bootstrapping it to become the largest gaming company in Latin America with about 4 billion downloads.
- [01:11]
Unknown
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- [04:10]
Harry Stebbings
Victor, dude, I have basically stalked the shit out of you for the last 24 hours. I spoke to Peter Chatham, Sarah, Bruce Dunleavy, Pat Grady, the Brex founders. I did my work for this one, so thank you for joining me.
- [04:25]
Victor Lozzarte
It's great to be here. Thank you for having me.
- [04:28]
Harry Stebbings
When I spoke to Pedro, he was like, not many people know, but respectfully, Vader really came from nothing like a hundred dollars to building a huge $350 million, I believe, revenue gaming business. Can you take me to that business build journey and one or two moments that really shaped who you are as a person and what you learned.
- [04:49]
Victor Lozzarte
Yeah, sure. So. So yeah, I bootstrapped a mobile gaming business and it makes for a good story, but the reality is we tried really hard to raise money. Like we didn't bootstrap by choice.
- [05:00]
Harry Stebbings
Why don't you think you could raise, what did you do wrong in hindsight?
- [05:04]
Victor Lozzarte
So like I wasn't very like business sophisticated. I mean this was like 2011 in Brazil. So the venture capital scene there wasn't as developed. Right. But the idea was I loved mobile games and I thought it was going to be a good business. But there wasn't a very strong, well thought out thesis. And I guess that's why the best term sheet that we got is someone offered us $50,000 for half the company which obviously we couldn't take.
- [05:33]
Harry Stebbings
That's a relief. We had Oscar on the show from Glovo in Europe and they sold a third for €100,000.
- [05:40]
Victor Lozzarte
Yeah, there's so many horror stories from like investors in Brazil at that time. So I wasn't very sophisticated but there were people that were even less sophisticated. So I had friends that they raised money in Brazil and they agreed to like a 20 times liquidation preference which seems like, oh yeah, there's this clause in the contract but I don't really know what it is. And yeah, like people do that and they end up losing their own company. They're their whole company. Right?
- [06:04]
Harry Stebbings
Absolutely nuts. Okay, so you're like shit, we can't fundraise, no one's giving us money. We need to build this business just naturally. What happens then?
- [06:12]
Victor Lozzarte
So I think that the core, like in college we loved video games and initially say hey, like let's, let's build a company's competitor, Nintendo. But that sounded like a really bad business idea. But then like we came, like we looked around and said hey, like what's working in the world? We saw that app downloads like this was 2010, we're starting the market and app downloads had grown 42 times from 2008 to 2009. Mobile app downloads had grown like 42 times. And I was like, wow, this growth is insane. So we should make mobile apps and we love games, so let's make mobile games. So I think that was a great insight. And so we started the company and the first few games we did everything ourselves. We didn't have any employees.
- [06:56]
Harry Stebbings
Does that shape your thinking on market timing? Because what you basically just referenced 100%.
- [07:01]
Victor Lozzarte
100%. I think when people want to start companies, a lot of times they're, they're trying to predict the future. But it turns out it's very hard to predict the future. It's much easier to understand the present. A good heuristic is like, hey, what's working? What's working right now? And there's the famous Story that Jeff Bezos, he was at D.E. shaw and like, he saw the Internet was growing like 23 times a year and said, hey, I need to make a business on the Internet. That was the initial insight. And then what's the insight right now? And it's quite clear LLM usage has grown 100x in the last two years. So if you measure in the number of flops, it went from one exaflop to 100 exaflops now. And of course, this data is not very precise, but it's directionally correct. I think the first thing is understanding what's happening today, what's working, and then how can you build on top of that. So in the year 2000, building an Internet company was an amazing thing. In 2010, building a mobile gaming company, building, like any app company was a great thing. And that's why you have some mobile gaming companies that were successful and other companies that were even more successful, like Uber and Instagram and all that. They were all started around the same time. And now LLM companies, it's quite clear it's the best time in over a decade to start a company because we have this insane phenomenon of adoption, like adoption of LLM inference. We started, like, what's the thing in LLMs that is working? I think a year and a half ago, there was basically, like, two things that were working. I think there was like, ChatGPT and Character AI. I would say Character AI was one of the things that was really working. And now I think you can argue that there's like character AI, chatgpt and cursor. Okay. What are the things that are working that people love? There's a lot of usage, like, like tens of millions of users. Right. And what these things have in common and a lot of times, like the. The great opportunities is that they're adjacent to things that are working today. So I think a great place to start is just like having a very profound, profound understanding of what's working.
- [09:02]
Harry Stebbings
And then build adjacencies to it.
- [09:04]
Victor Lozzarte
Yeah. Or like build things that are inspired by it. Right. When you look at the history of the best companies, like the most impactful companies, like Facebook was not the first social network. When Zuck built Facebook, there was MySpace and Friendster before it. But you could see that there were things in that direction that were working. And so the thing that I'm most excited right now, the thing that, frankly, the company I most love to work on is an AI companion. In a few years, we're going to look back and we're going to say that character AI was Friendster. And what I mean by that is there's going to be a company that is going to be very important and we'll look back and we'll say character AI was the precursor of that. And the reason I believe that is before the Internet, the way businesses interacted with people was through physical branches. And then you have the Internet and business interactive websites. And then in 2010 you had mobile apps and then business interacts with mobile apps. And now the really cool thing that we have is agents. And this is just starting. But the smartest businesses, they realize that the way customers will interact with the businesses, it's as if they were able to talk to the business owner. Like they talk to this thing that feels like a person that knows everything about the business and is able to like solve anything you want and sell you anything you want. So these agents, right, like I think some of the incumbents will reinvent themselves to have like an agent interface. But whenever you have a shift, like a UI shift of this magnitude, a lot of the businesses don't adapt. And so I think there's an opportunity to recreate a lot of the successful business of today in an agent format. So I think there's three categories. There's the category of incumbents that will adapt, there's the category of incumbents that will not adapt. And then startups will just recreate those businesses but on an agent first framework. And then there's a third category which is businesses that weren't possible before, but now are possible because the agent interface is the right one. But on that topic, I think like social networking and we now have software that makes us more efficient at connecting with our friends. You know, you have WhatsApp and you have like Facebook and Instagram. What does an agent for that look like? What's an agent for your social life?
- [11:21]
Harry Stebbings
I mean, is it not bluntly the removal of other humans? It's a 24 hour a day, constant companion that understands how you feel, responds to you in real time, and is your continuous, on demand friend.
- [11:32]
Victor Lozzarte
I think it's a really powerful idea.
- [11:34]
Harry Stebbings
Do you know what astounds me, Victor? Honestly and sorry, you said beforehand you wanted something conversational and I agree with you. I'm terrified about the mental health pandemic that we have today. Young men are more likely to die of suicide than they are cancer. That is a terrifying statistic. And what I find astounding is that really the largest mental health company is what? Calm. Respectfully, it's not A huge business, you know, one and a half billion. It's not a huge business.
- [11:59]
Victor Lozzarte
Yeah.
- [12:00]
Harry Stebbings
If our jobs is to solve humanity's biggest problems, what's going. Where's the disconnect?
- [12:05]
Victor Lozzarte
I wouldn't even make, like, a larger claim. And the claim is, what do people want? And like, in the end, people just want to be happy. And there's a lot of study on, like, what makes someone happy. Right. And turns out that wealth makes people happier. Like, the more material wealth you have, the happier you are. But it's actually, it's not like a linear relationship. It's like log linear. So if you get to like $75,000 a year for a U.S. household, like, you start to taper off. And so making people wealthier actually does not affect their happiness that much. And then what does technology do? Like, technology helps us be more productive, which is like, hey, it makes us wealthier and it makes us achieve the goals that we want better. Right. So it makes us more productive. But research shows that the biggest predictor of your happiness is the quality and depth of your relationships. And technology has not attacked that. The really cool thing now is we're able to have a digital friend. And I think that would be fantastic. I think you look at the studies and religious people, on average are happier than non religious people. A lot of the difference is explained because religious people have the stronger ties with the community. But also religious people, they have a relationship with God. So God is this friend that you'll never see. You talk to God, but God doesn't talk back. And so to me, that's existence that proves that you can have this entity that you never see. That is an important relationship to you that makes you that much happier.
- [13:36]
Harry Stebbings
I say actually that the death of religion is the thesis for CPG and consumer brand investors today. And you're like, what? We've shifted cult like worshipping from God, Buddha and these deist figures to Hyrox and Crossfit and Taylor Swift and Lululemon. And they are ironically, in the minds of modern consumers, a community which consolidates beliefs and brings unity, soul cycle. It is this feeling of togetherness, which is extraordinary to say that's replaced God maybe is signifying of society, but I think about that a lot. Question. Would you not say that social has brought more high quality and dep to relationships? If you think about your ability to follow your friend's wedding on Instagram, yeah.
- [14:21]
Victor Lozzarte
I think social is definitely positive. And like, I first started interacting with my wife. I met my wife like three years ago. And I first interacted with her like through Instagram. We had like friends in common. So I started following her and like commenting on her stories. Maybe our relationship wouldn't have happened because of Instagram. And she's the biggest source of joy in my life. So incredibly, incredibly grateful that, that these things exist. But I think this thing just scratches the surface. I think the way Instagram is set up, it does not help you connect. Nowhere near the way it would be able to. When you think about why is it adaptive to have friends? And a lot of it is like, okay, we need to have a story that helps us understand what's happening with us. We create our own internal narrative. And when you have a friend, you explain your narrative to your friends and your friends comments on your narrative and helps you shape it. And that makes you better able to understand yourself and where you're going, right? So humans, they have this intense need to feel seen and understood. And this is very adaptive. We're at a point where AI is able to do that for you. Like, AI is able to help you shape, like, okay, what is your personal narrative? I have this very strong belief that five years from now, for the majority of people, the person that will understand you the most is going to be an AI.
- [15:37]
Harry Stebbings
Is that a world that you want your kids to grow up in?
- [15:40]
Victor Lozzarte
I think that's like, that's where I disagree with a lot of people. I think we're always very afraid of technology. Like humans are always very afraid of what's coming next. I actually think it's going to be wonderful. People feel isolated and like being isolated is bad for a bunch of reasons, because you feel like you don't understand yourself. Like, if you have a challenge, you have a hard time thinking about this challenge. Like, imagine you have this hyper capable friend that helps you understand yourself, knows everything about you. And whatever situation you have, it helps you figure that out. So you feel supported, you feel like you're never alone. Even more than that, I think a lot of people say, oh, this is very dystopic, because once you have this AI friends, you won't have regular friends. I think this is very untrue because in the end we still want to see people in person. And your AI friend not only will help you understand yourself, but it will help you connect with great people. It will help you find out, hey, I know you really well. And turns out that there's 100 million people that I know really well and I'm going to connect you guys, but it's going to Function very much in the way that a person introducing you to someone else's functions, which is like, you get this intro, but you have a common friend, so you know you have to behave well. Because if you don't behave well, it's like, hey, I'm going to tell your AI friends that you're an asshole and your AI friend is never going to introduce you to anyone anymore.
- [17:04]
Harry Stebbings
Speaking of AI friends and the quality and depth of relationships, when I bluntly spoke to so many people about you, there was one relationship in particular which struck me, which was when I spoke to Pedro at Brax about you and he mentioned a number of things which just really highlighted the depth of your friendship. You invested pre product, pre revenue. Can you take me to that? What that journey has taught you about investing company trajectory?
- [17:30]
Victor Lozzarte
Yeah. So the way I met Pedro is so I was building my company in Brazil. We bootstrapped the business. We eventually grew it over a billion users. And there were very few people building technology companies in Brazil at the time. And then Pedro, he had a problem with an investor. When he was 16, he created his first payments company in Brazil. Turns out that he signed a deal that he shouldn't have and he lost control of the company and the investors made it impossible for him to capture any value. So I spent a ton of time with him and with lawyers and say, hey, how do we get out of this? And I had no shares. I was just like, man, I was just like, hey, this kid is so smart. This kid is so good, he deserves to succeed, right? So I really wanted him to succeed. And then after a while I was like, hey man, I'm selling my mobile gaming company. We sell things in the US and the US is a much better market. You should just let go of the company that you have and should go build something similar in the us and so eventually he agreed to it and so he moved to the US and he started Brex. And then when he started Brex, he's like, hey, can you invest on my seed round and can you be my first board member? And I was like, yeah, of course, I'd love to do that. So I think our relationship came in from this shared distrust of investors and this idea that, hey, we're going to have each other's back. And the other part that I really enjoyed is like, to me, it was just so fun spending time with this young kid that just loved business so much. And frankly, I don't think I would have invested in Merkor if I hadn't invested in Brex. Because when I met the Merkor guys, you know, at first glance, like, the business are so different, but I met the Merkor guys and like, the company was doing a million dollars in annual revenue. But Brandon reminded me so much of the Brex founders because there's these two traits that I look for in entrepreneurs that they both have, and these two traits, they rarely come together. So I like to invest in founders that they're very open minded, but they're very disagreeable. Normally, if someone is very open minded, like, okay, you say something and he wants to learn more, and he's very curious about what you're saying, you make a whole argument and then you start feeling, okay, I convince this person because it's just so interesting in what I have to say. But then by the end of the day, the person says, no, I actually think that the opposite is true. So this idea that I'm interested in what you have to say, but I have no problem disagreeing with you to the point that is going to upset you. And both Pedro and Brendan had that to a very high degree. And the other thing is, I think a great way to understand founders is ask them how they spend their free time. I think if you understand how founders spend their free time, like, you get a very deep window into who they.
- [20:15]
Harry Stebbings
Are when you ask that how do the best display themselves? What are the variants of answers?
- [20:22]
Victor Lozzarte
And to be honest, this is a trick that I stole from Yuri Milner. So I was having breakfast with Yuri and I asked him, hey, what makes you a good investor? And he was telling me, like, oh, when I met a founder, I asked him, hey, what's your day like? But it's not like, oh, tell me two, three things. I don't know what time you wake up, what is the first thing you do? And then walk through the entire day and they're like, what time you go to bed and what are you doing bed? The choices that people make on their free time are the ones that really tell you who they are. And for Pedro, it's like, hey, on my free time, I love sitting in front of my computer tracking the packages that iOS that the iPhones send to servers. Because I really understand how that architecture is done. Because if I pay enough attention, I get a chance to hack it. That's how he found one of the jailbreaks. Back in the day, he was the first person to find one of the jailbreaks for the iPhone, but he did that for no reason. He didn't make money out of it. It's just like, okay, I like going very deep on this technical thing. And then with Brandon, our first conversation, the guy's 21 years old, but you're talking with him about business and it feels like, it feels like you're talking to your peer about business. He was telling me, you know, like, what is it like to work with Bill Gurley? Like, I've read all the blog posts, man. Like, why would you read, like, all of Bill Gurley's blog posts from, like, years and years and years ago? And again, like, I heard all the podcasts and like, there wasn't a specific reason for the person to do that, but it's like, hey, I just love studying businesses and how these businesses work. When you have very young people that they spend a ton of time on something that are just an intrinsic passion for them, this thing compounds really well over time. So to me, it's like, hey, really smart kid in a very promising space. But it's a kid that is not just smart. Very, very special because of this almost obsessiveness of understanding businesses. And then little did I know that Mercour and Brendan would have something else in common, which is Brex went from like zero to $1 million in revenue, like, in 18 months after launch. And Mercur went from like $1 million in revenue when I invested to like over 100 million, like, in 11 months.
- [22:44]
Harry Stebbings
I want to talk about the revenue scale. Do you just want to talk about actually emotional maturity? I look back to myself When I was 21, I worked with 21 year olds. As brilliant as they are and as insightful as they are, in my mind, you gain scar tissue, nuance, just a little bit of wisdom with age, and you can supplant that with great mentors. But do you find you have to change the type of investor that you are, the board member that you are, the coach that you are with a younger founder?
- [23:15]
Victor Lozzarte
Yes. Like, I think 100% and, you know, I think a lot about what's the, what's the role of a board member. I think it's related to, like, what's, what's special about Silicon Valley. And, you know, I was trying to come up with a number, but if you start a company in the west coast of the United States, like, you are a thousand times more likely to build a tech giant in the west coast of the United States than you are anywhere else in the world. Right. The RAW Math is 70% of, like, all companies in the world were starting the west coast of the United States, Bay Area, Seattle, and I think 0.1% of people live there. So, like, you do the math, it's like roughly like a thousand times more likely, right? So why is that? Because people are just as smart in Silicon Valley than they are in Europe or in Brazil. But the big difference here is there's so much knowledge about how companies are built. And when someone starts a company is able to access all that knowledge. So when Zuck did Facebook, he hired a bunch of people from Google and he had board members that had been at other places. A lot of the role of a board member is how do you catalyze that? How do you help a founder access all the knowledge of what has worked before? I think the way a board member adds value is like, it's a function of two things. One is like, how exposed have you been to hyper growth in the past? And then how much time do you put in to actually understand the context of the company that you're able to draw from the, from the right lessons?
- [24:43]
Harry Stebbings
Do you like being a board member?
- [24:45]
Victor Lozzarte
I love being a board member. I wish that was the job.
- [24:48]
Harry Stebbings
How many companies do you meet a week on average? Net new?
- [24:51]
Victor Lozzarte
I probably meet like one or two.
- [24:53]
Harry Stebbings
Companies a day, so like five to ten a week?
- [24:55]
Victor Lozzarte
Yeah.
- [24:56]
Harry Stebbings
Interested? How many of those are raw inbound.
- [25:00]
Victor Lozzarte
Like people emailing me, like, one.
- [25:02]
Harry Stebbings
One a week?
- [25:03]
Victor Lozzarte
Yeah. So one inbound, nine outbound. Is that good?
- [25:06]
Harry Stebbings
Do you do active outbound? Like where you're like, no.
- [25:09]
Victor Lozzarte
So the majority, like, the majority of what I do is like outbound, like the majority. Yeah.
- [25:15]
Harry Stebbings
Everyone thinks you join Benchmark or you join Sequoia and just deals come to you. Deals just come. Does that happen?
- [25:22]
Victor Lozzarte
So there's a lot of things that come to you, but the question is, are the deals that you want to do, are they coming to you or not? And I think as you build, like, as you build your network and like, I'm not from Silicon Valley and frankly, like, I've been a founder for 13 years and I've been an investor for like a year and a half. So a lot of people don't think of me as an investor. So very little of what I want to do just comes inbound and sounds like, hey, go meet this company. Most of the time you're talking to really high quality people and you ask them like, hey, what has impressed you mostly? Or you get super interested in a sector and then you say, okay, we go to someone say, hey, what are all the companies in the sector? And you do a little bit of homework and then it's like, oh, okay. This is an interesting company. I think I've done four companies since I started a benchmark. Three have been this way and then the fourth one, the fourth one, I actually, I'm a co founder, so I started the company with someone that, that I knew for a long time.
- [26:15]
Harry Stebbings
You started a company?
- [26:16]
Victor Lozzarte
Yeah, we're still, we're still in stealth, so like we're not, we're not talking too much about it, but maybe a year from now I'll come back and tell you all about it when we.
- [26:24]
Harry Stebbings
Go back to Macaw and Brex. As you said there, their revenue scaling, I think Brex was 18 months to 100 million. McCor's 11 months. Insane. The challenge that I have is have revenue rules broken in terms of scaling expectations and have we lied to a generation of founders that triple, triple, double, double, and now that's just not the case.
- [26:44]
Victor Lozzarte
I think SaaS was a moment in time where like a rule based investing works really well. It gets you $10 million in revenue like you're a category winner. I think this is no longer true.
- [26:55]
Harry Stebbings
Why?
- [26:56]
Victor Lozzarte
I think it's because the nature of the revenue, I think a lot of the AI revenue is experimental. And the reality is it's now incredibly easy to take ChatGPT and say, okay, what are companies using ChatGPT for? Let's say their lawyers are using ChatGPT to write demand letters. So, okay, I'm going to make this very thin workflow around ChatGPT and then I'm going to go after every law firm that writes demand letters and say, hey, buy my tool. And you are going to get revenue, you're going to get millions of dollars. But if that's all you're doing, there's just no enterprise value. The reality is as the models get better, the workflow you're building becomes less valuable. So one task that we always do is when a company comes in and pitches first you have revenue growth, it's still worth something. It's not worth what it was worth before, but it's like, hey, you have revenue growth. Okay, we should pay attention. But then the first question that we ask is if models get a lot better, is your company worse or is your company better? And if your company is worse, then it's going to be very hard to touch it. But if your company is like, hey, as the models get better, my company gets better, then it's like, oh, that's a great place to be in. So for example, Merkore, what got me excited is so first one thing that I think is super exciting right now is just replacing people. It sounds really bad when you say it this way, but it's the most exciting opportunity inventor right now. And it's actually going to be fantastic for humanity. So it's like, okay, figure out what's a profile of a person that does knowledge work that you can replace with a model. And Mercour is like replacing a human replacing a recruiter. I was like, oh, that's pretty cool. I think models are going to be better at interviewing than people. And the recruiting process now is just so inefficient that if you have a model interviewing, that's going to make it a lot better. But then there's a few things that make it super interesting, which is interviewing someone is a very hard problem. You talk to the best founders in the world, like Elon, Musk, Bezos. They all spend a ton of time interviewing because figuring out who's the right person, you continue to have gains to quality. So, okay, this is a problem where we already have value now, but as you get better, it continues to be valuable. And so investing a lot of money, solving that specific problem is valuable. And then if you get specific data, you hire people, you see how they perform, you adjust your model. Having that model is just incredibly valuable. And the other thing is you have this network effect with like, okay, there's a platform. Everyone is coming into the platform. So you have this marketplace of people. So to me, it's like, okay, at the time, they didn't have a lot of revenue. They had a million dollars. But I was like, oh, this is a place where AIs were going to do a much better job than humans. And you have like a lot of defensibility.
- [29:41]
Harry Stebbings
We spoke about kind of quality of revenue and applying that to McCool. I had them on the show. Lovely guys. People were like, not revenue. It's not like air are Harry and I had like smart people in my DMs be like, Harry, that's not revenue. Is it revenue? Is it not revenue? Was I wrong?
- [30:00]
Victor Lozzarte
No, it's revenue. It's revenue for sure.
- [30:02]
Harry Stebbings
Is it Arrow?
- [30:04]
Victor Lozzarte
You don't have like an annual contract that people are signing this annual contract. It's a run rate. So some people criticize. And the criticism that I hear is you have this recruiter and you're building this platform, and a lot of the growth is coming from labs and the labs they need. Before, there were three stages of language models. I think the first stage of language models is you just take text from the Internet. You train your model and you have GPT3, which was very cool, but people didn't like to use it. And then first you had RLHF, which is models produced. So you take your base model, you produce a bunch of answers, and then you had humans pick what they like best. And then you build a model that give answers that humans like a lot more. And then you have ChatGPT. That was the big ChatGPT innovation, was RLHF. And now we're getting to this third moment in models, which is like pure RL. I think this is the most interesting thing happening right now in AI, which is models. If you want to get a model to be better in something, what you do is you find a deep expert in that subject, and the expert will create a question that the model is not able to answer. And then instead of giving the model the answer, it will create a rubric to tell the model, hey, for any answer to that question, here's how you're going to rate it. And then once that's done, the model produces a very large number of answers. And then you have this very large number of pairs of question and answers that are graded, and use that to train your model. So this is the most interesting thing happening in rl, and this is a big. In AI, this is a big deal, because what this means is we're getting to a point where if you're able to create a benchmark for any task, then through reinforcement learning and just through throwing a lot of compute at it, you're able to create a model that surpasses that benchmark. Where does Mercur come in? It turns out that to create questions that the models are not able to answer and to find people that are able to create these rubrics, this evaluation criteria, it's very hard. You got to be an amazing interviewer to find these people. That's the interviewing that Mercur does. So Mercur helps all the labs get a lot of the really best people. And then so the criticism's like, hey, is this recurring? It's not an annual contract, but the reality is, for as long as humans are better than computers at any knowledge task, you're going to need people to create these evals so that you create these RL environments that will make better models. Right?
- [32:44]
Harry Stebbings
Completely understand and agree. My question to you is, am I getting paid for the risk that I'm taking? And when you have a reduction in revenue quality, like revenue run rate versus enterprise error, or I'm just like, take a hey, Jen? A lot of it, like other people in the space, it's experimental revenue. It's not super sticky servicenow revenue. You need to be paid for the risks that you're taking. Do you think we're getting paid for the risks that we're taking? Giving the price premiums that AI companies.
- [33:11]
Victor Lozzarte
Are demanding, it's very much on a case by case like Heygen and Merkor. I think they were very cheap rounds and I feel so lucky that I was able to.
- [33:21]
Harry Stebbings
Do you think 2 billion was cheap?
- [33:24]
Victor Lozzarte
I was talking about the round that I did.
- [33:25]
Harry Stebbings
Ah, right, yeah.
- [33:29]
Victor Lozzarte
But then just a framework to talk about the rounds in general. Right. I think as an asset class, is there a bubble? Are people getting paid for the, the risk they're taking? Right. So you think about like, I don't know, anthropic at 60 or you think about perplexity at 15. Right. I think the reality is AI is a big shift. I think AI is much bigger than mobile. Maybe like all the order magnitude of the Internet. And then if you take a basket of the winners, it's going to work out. What I'm telling you is in the next three years, I'm sure someone will start a company that is going to be worth a trillion dollars. How do you make sure you are in this company? It's like, okay, where's the best place to find these companies? It's like what are the interesting spaces that have great teams? And it's working. So okay, there's this trillion dollar companies out there and the space like okay, the early winners, they're not that many. Right. So I think smart investors are saying, hey, if software spend in the US is like a trillion dollars, but labor spend is like 10 trillion and now like the AI companies are going after the labor spend and so the outcomes are going to be like insanely larger than they were before. So okay, there's going to be huge winners. So we got to make sure that we're there. Like we've got to make sure that we're in these companies. So I think on average buying the winners today will work out. Are there some winners that are overpriced? In retrospect, the answer will be yes.
- [34:53]
Harry Stebbings
Listen, Girly has spoken before about passing on Google on price and his lessons from that. And I always think of that. The question is if you see this shift in budget from labor to technology spending. Something that I just worry inherently about is like the increasing chasm between rich and poor and the inequality that comes as a result. Even if there are 5,000 people in that company, that's worth a trillion dollars. It could replace a trillion dollars of spend on labor. Do you share my concern and is that just an inevitable progression?
- [35:23]
Victor Lozzarte
100%. What percentage of knowledge work, as we know today will exist in 10 years? Like, if you define knowledge work as work you do behind a computer, I think it's probably like 1%. And you know, the thing that I worry most about is if you're college, if you're someone coming out of college, what are the things that you can do? Like if you're coming out of law school, like, what are the things that you can do that a model won't be able to do? Like, in three years there's not going to be that many things. And at the same time, companies will be more valuable because they're going to reduce costs so much. So people that own companies, people that own shares will get richer, founders will get way richer. You're going to have this trillion dollar companies being done by very small teams. So that's a very destabilizing force. And that is something to worry about. And I think all these things are controversial. So you see these big leaders talking, like the big company CEO talking about like, oh no, AI is not replacing people. AI is actually augmenting people's abilities. Like, this is bullshit. It's fully replacing people.
- [36:23]
Harry Stebbings
My favorite line that we get on the show, which is not hiring new, but we're keeping everything as is. And you're like, really?
- [36:30]
Victor Lozzarte
Yeah, you know, net, net. I think this will be tremendous for society because companies are humanity's best invention. And if we need less people to create companies, we're going to have more companies. Right? So I grew up in Brazil, and Brazil is not a great place to grow up in. And then I moved to the US and like the Bay Area, turns out it's a fantastic place to live. And the principal difference between Brazil and the Bay Area is the quality of the companies. So overall, it's going to be fantastic for society. But then there's a huge problem of, okay, how do you distribute that wealth?
- [37:02]
Harry Stebbings
I don't buy ubi, by the way. I think that is fundamentally lacking. No, humanity requires purpose. If you add ubi, you remove purpose. And people say, oh, we're going to fish and we're going to paint. I promise you that is not how human psychology works. That's why we have addiction, that's why we have drugs, it's why we have gambling, it's why we have prostitution. Sorry, this is the dark side of humanity. We will not paint and write. Write poetry.
- [37:25]
Victor Lozzarte
Yeah, well, I think we either have UBI or it's standard democracy.
- [37:30]
Harry Stebbings
Talk to me about that.
- [37:31]
Victor Lozzarte
Like, imagine this society where there's a lot of abundance, a lot of wealth, but the majority of the people are not accessing that wealth. Like that wealth is very concentrated, but it's a democracy. And turns out that is that not.
- [37:43]
Harry Stebbings
What we have today.
- [37:44]
Victor Lozzarte
It's going to get way more extreme. And the other thing is it's going to be much harder for politicians to not do what's best for the entire population because the entire population will have a very powerful AI assistant on their pockets. So they will know. They'll just ask the assistant, hey, this politician, the stuff that he voted on, is that good for the general population or not? And then someone will come in and will have an agenda that is like, hey, big redistribution of wealth. It's a very populist agenda. And then I think if people very selfishly ask their AIs like, hey, is this politician better for me or not? Is this politician going to get me more material wealth or not? I think people that want to redistribute a lot, they'll get votes. So I think that's very destabilizing for democracy. And then a lot of people that are in control, they're going to say, hey, right now you have people that are in control. Are they going to just cede control? Are they going to be less powerful? Are they really going to let go of all the influence that they have? But I think there's one. So I think AI is a destabilizing force because it makes the entire population way more powerful, informed and knowing what's best for them. And at the same time it concentrates wealth, which makes the scenario more propense to, hey, the population wanting to get more. I think China is actually a very stabilizing force because I think the US right now has this external threat and the US cannot spend a lot of time with internal conflict. We're at a very important moment in time where someone will get to a powerful AI very soon. And it needs to be the us because we want to live in a world where powerful AI is controlled by the us and if we spend too much time in internal conflict, China will do it. So I think China is actually a very stabilizing force for the us.
- [39:32]
Harry Stebbings
The best way to unite is to have a common enemy. That said, I don't feel the US is winning the race against China. I think China are absolutely crushing the us. I mean, Europe's not even in the fucking race.
- [39:43]
Victor Lozzarte
Yeah.
- [39:44]
Harry Stebbings
When you look at the investments that China have into their education, infrastructure systems and the depths of their talent. Respectfully. And the work ethic that they have, it just completely destroys anything we have elsewhere on the planet.
- [39:57]
Victor Lozzarte
Yeah. I think China has better work ethic and they have more people, so they have more people working harder. But I'm still so bullish in the US because there's so much knowledge here. I think our advantage is it's like the true network effects of the city. Right. So we have Silicon Valley and you say, hey, I think China's winning. I think by all measures, like the US is winning. If you look at all the AI products, like ChatGPT is the most used AI assistant in the world. And sure, you can talk about like, oh, how about deep sea and this and that, but the reality is like ChatGPT still is the best product out there.
- [40:34]
Harry Stebbings
Yeah. I mean.
- [40:37]
Victor Lozzarte
What'S better than ChatGPT?
- [40:39]
Harry Stebbings
I completely agree with what you say. I do not trust or believe anything that China says. And I think they have an armory of weapons AI related that they do not show the world that they have ready to go. I think TikTok is a weapon of consumer data aggregation acquisition. They are so strategic and smart in how they've leveraged SHEIN and TEMU as well their infrastructure investments in Africa. I think people don't spend enough time on. It's a shit answer for me because I'm not really giving you one. I'm just saying I don't underestimate them and I know that they are doing strategic things which I don't even know about, which I think we're not doing.
- [41:22]
Victor Lozzarte
I agree. It's like a very serious competitor. I 100% agree with you. I think we're still in the lead, but we cannot afford to waste time on anything else. We cannot afford to waste time into internal disagreements and stuff like that.
- [41:36]
Harry Stebbings
Can I ask you. I think it's very easy for us to get excited by transitions, by improvements in human lives and how we won't be doing mundane tasks that we all kind of fucking hate doing anyway. But then it's very easy to get caught up in the kind of short term. Do you think we overestimate adoption in the short term and underestimate it in the long, or do you think this will happen much quicker than we think?
- [42:01]
Victor Lozzarte
I think there's a lot of wisdom in saying, like, hey, we overestimate what we can do in a year and underestimate what we can do in 10, right? I think there's a lot of truth to that. I still think in AI, you look at three years ago, we didn't have ChatGPT and now there's close to a billion people that use it every month and they have a meaningful different experience. So not in the next year, but in the next five years, lives will be meaningfully changed. So I think AI is going to happen like way faster than people believe.
- [42:34]
Harry Stebbings
What crazy thing or what thing do we do today that we will look back on and go, that's crazy. I remember like, hey, you'll find your loved one on a dating app. Bullshit, you won't. Hey, you put your credit card details into the Internet. No way. What's that?
- [42:50]
Victor Lozzarte
I think this thing that will happen quite soon is like we're going to have an app and you're going to wake up and you're going to look at your app and you're going to read what it says and you're just going to do it. The app will tell you go do this. You're not going to understand, but you're just going to do it and you're going to do it and turns out that you're going to be happier after you do this thing. And over time, like you just learn to trust the app. It's going to be a complete reversal. Like you're not going to apps to make it easier to do the things you want to do. For example, like oh, I go on instacarts, like get my groceries, you know what you want to do. You go there and it just makes it easier for that to happen. It's like you go to the app for the app to tell you what to do and you just blindly trust and does whatever the app says.
- [43:30]
Harry Stebbings
How far away do you think that is?
- [43:32]
Victor Lozzarte
We see glimpses of this, right? So you know, there's this companion apps like there's a finch or like this like self care pets. You know, it's like, oh, I'm going to be your accountability buddy. I'm going to help you like exercise every day and like I'm going to help you like make sure you're drinking water and taking your meds. So I think it starts with these simple things. You open up your app. So for example, I try to work out every morning for 20 minutes, but a lot of times I wake up and I just don't have the energy. But imagine you wake up and say, hey, it's your 20 minutes. Remember? Because if you do that for X days, you're gonna be better. And then you're just getting to these routines, these apps, they're helping you form routines. So I think that's the beginning. These apps that are helping you form routines, they're telling you what to do. And it'll get to a point where AIs are going to be smarter than us. AI is going to be smarter than us on most things and they're just going to learn how to trust their judgment. They have context on you, they know what your long term goals is. And so you wake up and say, hey, go spend an hour reading this book and just do it. Now go meet with that person and just do it.
- [44:38]
Harry Stebbings
It's funny, I got asked the other day, what advice do you have for me? I'm leaving university. Sorry. I'm leaving school, about to go into university. And I said, very simple, become a brain surgeon or a dentist. Promise you'll be safe for about 20 years minimum. What advice would you have?
- [44:53]
Victor Lozzarte
I have the opposite view. Like I think go study computer science.
- [44:56]
Harry Stebbings
Really?
- [44:57]
Victor Lozzarte
Yes.
- [44:58]
Harry Stebbings
And to me it's like the antithetical to what everyone is saying. That's, that's a fascinating piece of advice.
- [45:03]
Victor Lozzarte
Yeah, they say, hey, go on computer science. To me, I feel very strongly about that. Before it had calculators, machines, we had human calculators. If you saw the Apollo movie, and they're typically women and they're calculating these tables, there are people that are just doing math. And then calculators were invented. And then when calculators were invented, it's not like, oh, people shouldn't study math. No, people should study math. And if you study math, the reality is you're studying math in high school and you're studying math in college. The first few years of college, you're doing stuff that computers can do, but it doesn't matter because first you're understanding the technology. And two, there's so much transfer learning. When we train models to code, they get better at a lot of other stuff. Why I advise people like, hey, go on. Computer science is the transformation right now. It's technology transformation, it's an AI transformation. So go study computer science. Because even if you're not going to be a developer, and you're probably not going to be a developer, but just having the basis to understand how that's done is going to be extremely helpful. And then the transfer learning of, hey, just being very logical and be able to take a big task and break down into small tasks and be very rigorous, I think that will continue to be very valuable.
- [46:22]
Harry Stebbings
When you look at the AI companies of the last 18 months. You're in several absolute bangers. Which one are you not in that you had the chance to and you just missed.
- [46:33]
Victor Lozzarte
Yeah, so. So we made like we participated in one round of cursor but I think the coding space is very interesting. I think I like.
- [46:42]
Harry Stebbings
That's an interesting one. You participated in one round. I'm just interested like Benchmark are famed for like the leading the A. How do you think in the partnership now about plasticity around stage and whether.
- [46:54]
Unknown
You have to lead?
- [46:55]
Harry Stebbings
You know, I obviously know Fanton well and he did airtable. I think the C Girley's had flexibility around. How do you think about actually the rigidity of. No, we have to lead the A.
- [47:04]
Victor Lozzarte
I think rigidity is nonsense, frankly. What defines Benchmark? We want to be a partner to the most important companies being created, which is similar to most venture firms out there. And I think the difference is we want to be the first call like we want to be the first call to like every. Every entrepreneur that, that we work with. And in order to do that, like the easiest way to do that.
- [47:26]
Harry Stebbings
Can I be a dick as a. As a friend? Every VC says that I don't even want to be first cool like your mum should be your first call. I want to be your worst cool in terms of like when the really hits the fan call me. It may never happen but that terrible time, I'm the person who's going to help me.
- [47:48]
Victor Lozzarte
Yeah. All else being equal, I think everyone wants to be the closest partner. But I think the part that changes all else being equal. Right. I think it's like, hey, we're willing to take a lot of trade offs in order to be a very close partner. Right. So why does Benchmark make very few investments? It's because we spend more time with our companies and you know, you're saying like all investors want to be the first call. I don't think it's true because the reality is if you're a financial investor, you don't want to be the call. You want to. Okay, you made your investments, you want to find the next company. And like there's a lot of investors that are really smart investors that say, hey, you know what? Like I hate the board work. You know, I want to write the check and there's an investor that says, hey, that's not the product that I have. I put my check in and that's it.
- [48:29]
Harry Stebbings
Do you think an investor can move the needle for a founder? You know, Keith Roboy says that, you know, the best founders don't need you.
- [48:35]
Victor Lozzarte
Yeah, if you call the people that I work with and you should call them and it's like I did, I think you can. Right. So one thing that made me very happy is like a few months back, like Pedro came to me and said, hey man, I'm so grateful that you've been a partner on this. And you're the closest thing that I have to a co founder outside of the company. Right. And can you make a difference? I think it's actually very hard to make a significant difference from the outside. But the way you do it is founders need a thought partner and founders need a way to access all the knowledge in the ecosystem and you can catalyze that. But I think the good founders, they have access to a bunch of people. The good founders, they don't work in isolation, they have access to a bunch of people. But the difference, the thing that you can do as a board member that is very hard for other people to do is I've been at the Brex board for, I don't know, seven years. And for every important hire that he did, like I discussed that with him and I've done like so many say, like close calls with candidates that once he has a problem, like he calls me just because I have way more context than he does, than other people do. Right. So I think, like, how do you add value? Like, what's the way to add value? Like, hey, you have a lot of context. But the thing is it's just very costly to have context. And like, that's why the reason we do very few deals is because getting context on the companies, like, takes a bunch of time.
- [49:55]
Harry Stebbings
If you're then flexi on your insertion point, maybe participating in a cursor round or doing a later round, do you have that ability to add context even? Because you're probably not on the board?
- [50:07]
Victor Lozzarte
Not in all. When we're participating, we don't have that ability and that's why we don't do it so normally. And the reason we do it sometimes, like, hey, maybe this is a way to start building a relationship with the founder and over time we'll grow our position and we'll build a relationship. But the reality is, like, if you write a small check and you're one of many, then you don't make any difference. It doesn't matter how smart you are.
- [50:29]
Harry Stebbings
Did you feel the weight of the benchmark GP role? When you come into any investing role, it's a lot of responsibility. Respectfully, your GP At Benchmark is your first. I know you're like a billion dollar founder, but it's still like a steep position to come into.
- [50:46]
Victor Lozzarte
Yeah. You know the thing that I love about Benchmark? It. So I came in and the partner said, hey, you're coming here to co found the firm. There's a lot of tradition, but a venture firm that is sticking to its tradition is soon going to be very relevant. So we believe a lot in creative destruction. And you feel like, oh, okay. You almost feel like, really? And then I met with the founding partners at Benchmark and they're like, hey, yeah, the only way, the only way we continue to be a great forum is if we have no attachment to just how the way things were done. And I actually think this is a big advantage for Benchmark because we don't have any process and we have a small team, it's easier for us to change things. And I think Venture is changing. I think Venture is changing a lot.
- [51:32]
Harry Stebbings
How do you think venture is changing?
- [51:33]
Victor Lozzarte
So I think a big difference is when you think about a couple decades ago, the role of a board member was governance. It's like capital was so scarce, they say, hey, once you put capital into a company, a lot of your jobs just like managing the downsides, like, hey, make sure that this guy is not going to lose all your money. And that's understandable because there had been less big outcomes in tech. So people that invested, they're kind of afraid. Fast forward to today. Everyone knows investing in technology, it's a great thing. People should do that. And it turns out that it's more important to maximize the upside than it is to manage your losses. Right. So. And the way this changes the role of a board member is you're not that concerned. It's like, oh, some of your investments are going to lose money. And your role is not governance. Your role is not there to say, hey, founder, you can do this or you can. No, your role is to maximize what the founder wants to do. So it goes from oversight to catalyzing to amplifying the founder's ambition.
- [52:39]
Harry Stebbings
Really? I agree with you. But officially, the job of a board member is to have a fiduciary duty to shareholders. Fiduciary duty to shareholders is not always the same as maximizing a founder's ambition. How do you think about that?
- [52:55]
Victor Lozzarte
So I think if you're taking a lot of decisions in isolation, like, oh, okay, in this case, I believe that if we do this, it's going to be better for the shareholders. But if you look at it in aggregate. Your policy is, I'm going to choose the best founders and I'm going to trust them. And my fiduciary duty comes in at the moment where I write the check. It's like I'm underwriting that person. Like, hey, do I think this guy will be a good CEO? And once you're there, I'm here to enable this guy, and even when I disagree with him, I'm just going to help him do what he wants to do.
- [53:28]
Harry Stebbings
Have you ever lost faith in a founder?
- [53:31]
Victor Lozzarte
Describe what lost faith means when you.
- [53:33]
Harry Stebbings
No longer believe that actually they are the right person to drive the company and actually you don't trust the decisions that they make are the best decisions.
- [53:42]
Victor Lozzarte
Yeah. So the reality is, like, the reality is I haven't done a ton of investments, right? But I've done a couple. Like, I've done a couple of angel investments where it didn't go well. Like, one of the things that I learned, like, after joining Benchmark, and I work a lot with Peter, and Peter sits on two of my boards, and I sit on two of his boards. And you see these companies go through these ups and downs. The thing that I learned is we don't give up. It's like, hey, as long as the founder wants to do it. And it's completely uneconomical. Completely uneconomical. So I was talking with Peter, and there was a company that wasn't doing well. And it's like, I know what we have to do. A lot of venture capitalists would say, hey, just cut it loose. Forget about this thing. We should double the frequency of the board meetings. I said, oh, okay. And it's because we're here for as long as the founder wants to try it. So it's like you made the commitment to the founder, and from that point on, you try to be true to this unconditional belief in the founder.
- [54:40]
Harry Stebbings
You mentioned Peter there. What would you most change about the current process Benchmark has for investment decision making?
- [54:48]
Victor Lozzarte
It's a very lightweight process, which is very good. So the way we work is, you know, you find a company, if you like it, you need to get your partner, your partner's opinion. But you don't need to get your partner's approval.
- [55:02]
Harry Stebbings
Do you bring them into early meetings with team, with founders? Do you kind of hunt a solo? How does that work? Do you tag team?
- [55:10]
Victor Lozzarte
It's all optional. It's like, all optional. The one thing that is not optional is, like, you have to present the idea to the other Partners, and everything else is optional. But the way it typically works is you meet a founder, do a second meeting where you bring another partner in so you guys can have that discussion. But then if you know you want to do it and you like it, typically you bring the company in, everyone talks to the company, and then people vote. But it doesn't matter what the vote is. If you really want to do it, you can do it.
- [55:36]
Harry Stebbings
And so why vote? The vote is just a temperature gauge.
- [55:40]
Victor Lozzarte
So the voters should disambiguate what people actually think. You got a clear signal because you're going to bring a company in. It doesn't matter what the company is. There's always a ton of reasons to do it and a ton of reasons not to do it. And then people argue both sides, so you force them to put a number to it. That number carries a lot of information. We vote from 1 to 10, and you can't vote 5.
- [56:03]
Harry Stebbings
I asked Peter what should I ask him. He said, the one question I'd really want to know from Victor is if you look back in 10 years, in what ways do you want to have meaningfully changed benchmark to prevent its extinction?
- [56:16]
Victor Lozzarte
I don't know if, like, prevent the extinction is the function we're trying to maximize. I think the function we're trying to maximize is, like, there's going to be $10 trillion companies created in the next decade. How do we make it so that we're in a large number of them and we have a deep relationship with those founders? I think that's the maximizing function. And to me, it's just like it works backwards from how are you obviously the right choice for the founders that have a ton of choices, and right now, benchmark. When we want to do something, we typically do it. We have the chance to partner with the companies that we want to partner. But the problem is, because we're a small firm, there's a lot of stuff that we don't even see. And then sometimes people are raising a round that doesn't look like a benchmark round. And I think that is the thing that is most important for us to change. It's like, a lot of times people think, oh, this is a benchmark round. This is not a benchmark round. What it means, it needs to be clear to everyone, hey, what's a benchmark round? And a benchmark round is when there's a founder that is very capable going after a very big market. As long as you have that, that's a benchmark founder, it doesn't matter if you're raising 5 million or if you're.
- [57:26]
Harry Stebbings
Raising 200 million, it's a fund size now, a constraint. The constraint always was beautiful to everyone. It was a craft of Benchmark. In today's AI landscape. The rounds we just see is so big that 25, 50 million to start. Shit, if you want 15% ownership, you're putting 10% of the fund out on the first check.
- [57:48]
Victor Lozzarte
My first check at benchmark was a $55 million check into. Hey, J. Right. So like, this was my. This was my inaugural 55 million dollars. Yeah, this is my first check. 55 million dollar check. And yeah, because you know, in the end, like, hey, we gotta be true to.
- [58:04]
Harry Stebbings
No, I know. But dude, that's ten and a half percent of the fund. If it's a 500 fund, it's actually.
- [58:09]
Victor Lozzarte
A $600 million fund.
- [58:11]
Harry Stebbings
That's a lot. I mean, that's amazing.
- [58:12]
Victor Lozzarte
Yeah, I think a lot of funds, like, they think about portfolio construction and this and that, but the reality is RLP's, they're the same LPs in all funds. So if you want to do one $3 billion fund or if you want to do like five, like $600 million funds, like four LPs is actually the same. And so I think the fund size has never been a constraint. I think the constraint is where we can make a difference. Is like in the beginning. So it's like early. And we work best with founders that want to have a relationship. Some founders are like, hey, I do think it's valuable to have a sounding partner that is going to have a lot of context on the business. And if you believe in that, then it's like, yeah, Benchmark is a good fit. And most early rounds are less than 50 million. But you know, we've done things that are later. Like, we've done larger checks and like sometimes if we're going to do a larger check, we do an spv. But the check size, it's never been a constraint.
- [59:09]
Harry Stebbings
Final one for a quick fire. Does like Brett Taylor come in and pitch to partnership? He's a special dude. Sierra's a special company.
- [59:17]
Victor Lozzarte
I think on Brad's case is like, I think he had dinner with a partners. It was more like a conversation than a pitch. I think Brad Taylor's case, I think it's a good example. It's like, hey, the guy's so accomplished, he could raise from anyone, could do whatever he wanted. But I think he valued the relationship with Peter and said, hey, I think it's Going to be valuable to have you along this way. And because it's an equal partnership, it's like, hey, these people, they're going to be my partners in this company. So it's like, get to know you much more than, hey, I'm pitching you.
- [59:45]
Harry Stebbings
That is an insane one. Brett could fund himself for the rest of eternity in many respects, but he values Peter so much that he brings him in at that stage. That's pretty special.
- [59:55]
Victor Lozzarte
And I think it's a smart choice. And I think the best people, what they want to maximize for is like, hey, how do I get my conditions, my initial conditions, right? How do I get, like, the smartest people around the table? Because in the end, the initial conditions, like, they affect so much what you can actually do.
- [60:12]
Harry Stebbings
I could talk to you all day. Do you mind if we do a quick fire round and then I'll let you actually get on with some proper work. What do you believe that most around you disbelieve?
- [60:21]
Victor Lozzarte
I believe that pretty soon we're going to have an app and we're just going to wake up and do whatever the app tells us to do. In a way, we're going to be obedient to machines and we're going to love it.
- [60:31]
Harry Stebbings
Single biggest lesson from working with Peter Fenton.
- [60:33]
Victor Lozzarte
I think the thing that Peter does better than anyone I've met is he can understand people and he can get people to open up. So lots of times before we decide to work with the founder, Peter takes people to dinner. And a lot of times I would introduce people to Peter and I take Peter to dinner with someone. So, for example, I took the Brag coo to have dinner with Peter and it's someone that I've known for many, many years. At the end of that two and a half hour dinner, I felt like I knew the person a lot better than I did before. Peter does this thing where he's able to make people open up in a way. And the effect that it has is people leave the dinner and they said, wow, I just had a really special dinner, right? So I think it's a superpower and I think it's kind of known that this thing happens. So a lot of times, if you want to spend time with someone and it's kind of hard, a lot of times I invite, hey, you want to go have dinner with Peter and I? And most times people say yes. People say yes, they have a fantastic experience and then they'll tell more people. If you get, I would love the.
- [61:36]
Harry Stebbings
Band that's like, nah, sorry, I'M watching Netflix. Do you know anything?
- [61:41]
Victor Lozzarte
I'm sure it'll happen at some point, but that hasn't happened yet.
- [61:44]
Harry Stebbings
I don't think it's going to happen. Don't worry. That's just too funny. You can buy and hold one public company stock for 10 years. What do you buy and hold?
- [61:53]
Victor Lozzarte
Duolingo.
- [61:54]
Harry Stebbings
Why? Help me understand that, man.
- [61:57]
Victor Lozzarte
AI is going to change people's lives in really important ways. One really important thing is the way we're going to learn is going to be through AI teachers and Duolingo. I think it's very sneaky. Sneaky in a good way. They're starting with this language app, but they're making your AI friend that teaches languages and then they're going to teach more stuff. And Luis, the founder, he's a total genius. So I think he's going to make a free AI tutor for everyone that's going to be incredibly important to humanity and it's going to be a very valuable company.
- [62:29]
Harry Stebbings
You can invest in one seed fund and one growth fund. I'm not choosing A because that's tough for you. Who do you choose?
- [62:36]
Victor Lozzarte
There's an objective answer to that. It's like I'm an investor in Green Oaks. I think they're really good.
- [62:42]
Harry Stebbings
Neil Mason just taped me already. I mean, God, this man is brilliant.
- [62:47]
Victor Lozzarte
Yeah, he's amazing. I really like him. And then I'll go early. I'll go with conviction because I think Sarah's great.
- [62:55]
Harry Stebbings
Totally agree. What she's done in a short time frame for a new firm is incredible. Final one. When you think about the next 10 years for you, if we do this in 2034, where do you want to be then? What do you want to have achieved? What does Victor Lazarte look like then?
- [63:10]
Victor Lozzarte
I want to be an important part to the most important companies created and that can be a early board member and that can be a co founder. But I want to look back and say, hey, AI is going to solve so many of humanity's biggest problems from education to security. These companies are being created now to companionship and I want to be an important part of their story.
- [63:36]
Harry Stebbings
I am so glad that we had this schedule that I completely ignored and I think you saw that it was a much more free flowing discussion. I so appreciate you rolling with the free flowing discussion. You've been fantastic to have on. Thank you so much for joining me, man.
- [63:51]
Victor Lozzarte
Thank you, man. This is a lot of fun.
- [63:53]
Harry Stebbings
I mean that was such a special.
- [63:55]
Unknown
Show to do with Victor. If you want to Watch the full episode.
- [63:57]
Harry Stebbings
You can find it on YouTube by searching for 20VC. That's and before we leave you today.
- [64:04]
Unknown
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- [67:00]
Harry Stebbings
And stay tuned for an incredible episode with Jason Lemkin coming on Thursday where we break down the latest fundraisers, acquisitions, IPO opportunities. It's a fantastic conversation. Coming this Thursday.