The AI Boom Will Create Enormous Roadkill: Who Wins & Loses? | David Frankel

You've got this narrowing out in venture

where the bigger you get, it becomes

like a pyramid. If you miss the $3

trillion companies, you're much harder

to sell. This may just be another Uber,

another Sunno, another Shield AI. David

Frankle is one of the best from Founder

Collective. He's in Uber. He's in

Pillpack and SeatGeek and many great

names. It's incredibly hard to move to a

second wave, the wave of AI. The dude is

in the seeds for Shield AI for Sunno,

which now worth $5 billion. He has moved

so seamlessly from a pre to a post AI

world in a way that very few seed

ambassadors have been able to. This was

an incredible discussion with one of the

true craftsmen of seed investing today.

Are we headed for another crash?

Definitely. If is not a question. When

nobody knows. Ready to go. [music]

>> David, last night you sent me an email,

a forwarded email, and it was my first

ever email to you 11 years ago.

>> 11 years.

>> I can't believe that. Yeah. Uh, do you

know what I found so funny is I just had

dinner last night with Mimoon and I look

at the people who've been kindest to me,

which is you, Mimoon, Josh Kushner, Neil

Mater, and it's just fascinating that

the people who were there when there was

nothing are also the greats.

>> And it's like maybe that's what made

them great, that they give time to

people where they just believe with no

reason to. Does that make sense?

>> I'm honored to be included in that list.

But but maybe some of the thing is

they're like they're intoxicated and you

were intoxicating in my view like

there's you know you were 19 years old

but you were full-on focus energy like

you you just brought it right and I

think maybe part of the job and part of

the fun of the job is just like

recognizing that it's not all it takes

but but you kind of you had it. You have

it.

>> That's super kind of you to say in terms

of like having it. Obviously, we both

play at the early stages and I've said

before on social media and on X that the

hardest part of the market is seed in

many ways and the worst performing funds

will be the 50 to$100 million funds. I

say this to explain because you're too

big to be collaborative to write those

100 to 250k checks and be a friend, but

you're too small to lead a$ 8 to $10

million seat round. Why am I wrong? And

why will this vintage be great for those

funds?

Okay,

[laughter]

there is so much to unpack here. Look,

you've got this narrowing out in venture

where the bigger you get almost like it

becomes like a pyramid. Like I think

there is a the business of venture which

is asset management and this channel,

right? So, you've got the Cambridge

Associates and you've got the um Fund of

Funds and all they're doing is selling

access and they're they're fine with it.

And if the you name it, top 10, top five

names are not in XYZ great company and I

would say at this point if you're not

like in the top five, if you miss the at

a certain level, if you miss the $3

trillion companies, right, like you're

much harder to sell, right? And so so

it's not trillion dollar robust, but

like if you look at the numbers over the

last 25 years of how many companies were

created that are over hundred billion

dollars and the numbers are like there

were less than a hundred companies over

the last 25 years, less than a hundred

that are sustainably over 10 billion

companies. So you've at that top end,

you've got to be in that. The median

company, we've done a lot of work on

this very recently, but the median of

the top 500 companies created in the

last 25 years, the median is 2.6

billion. Now, if you own 5% of one of

those companies, you return the fund

each time. And I would say what's gone

on in seed is like there are whole bunch

of unreasonable bets being taken with

loads of funds and loads of money. And

you know, it's quick, right? because you

know you've got to get the check in

because you got to get to the next fund.

It's so it's incredibly tough at seed.

What's what makes this still a great

business is it's a little bit of what I

said about you is you can wait and wait

and wait and wait if you're patient and

then you just see someone, right? You

see a founder or you see a team and you

just go, I have to be there, right? And

to me, that's code for this may just be

another Uber, another Suno, another

Shield AI. And I think a little bit, I'm

I'm answering this personally, a little

bit of this is a drug, right? Is like,

you know, finding Harry. Finding that is

a bit of a drug. So I, you know,

addicted if that's the case. And I think

that that if you're in early,

um, you still have a chance of returning

a fund. I think it's a to it's a totally

different business. And by the way, do

you have to be the full $8 million?

Definitely not. We can't be. Can you

write a $3 million check? Can you write

a half a million check? Now, valuations,

uncapped notes, that's changing the

business. But you don't just have to do

that. So if you're if you're on pie and

I would say if you're on pie for the

last I've been doing this for 18 years

nearly is it was always expensive. It

was always tough but you find some of

the best people off pie always.

Can I ask you on those rounds when you

look at the 8 to 10 million rounds or

the the large seeds that we see today

are you able to participate though with

the two to three million when you have

your the multi-stage products provide

such an efficient seed product that

actually you might get 100k but being a

3 million check is much harder are you

able to even do that strategy you know I

I hesitate to say this Harry but I think

we're we're being seen and I'm I could

be overextrapulating the last 20 deals

that we've been involved in almost as an

insurance policy where we're side by

side. We're putting in 500k or a

million. There's been 8 $9 million going

in and

there's from the smart entrepreneurs

there's almost this knowledge of they

may abandon me and then having FC in my

back pocket could be useful.

>> Sure.

>> And I'll use their brand, right? I'll

use their I'll use their distribution

network to go out and say they actually

don't suck, right? They're not, you

know, we're not doing 10 million ARR

yet, but like they're more patient and

be patient and we're the testimonial

sales person. So, I think there's some

recognition of wow, for $500 or a

million dollars, not a bad insurance

policy.

>> Totally get that. So, that's the 8

million round and that's at 40 if we

>> No, we're doing we're not doing that

many $8 million rounds. We're still

finding three $4 million rounds.

>> Are you?

>> Yeah. Yeah. The valuations there move a

lot, right? They change a lot.

>> By the way, the other thing is there's

very little evidence yet that these hot

hot AI companies that are raising huge

amounts of money are capital efficient,

right? They're anything but capital

efficient. There's like the jury's out

on whether that's going to work still.

Totally get you. Just before we move

away, you said it's not in the hot hot

hot. You often don't get paid for being

a value investor and you can sometimes

be criticized for being smarter than the

market or whatever contrarian you want

to say. My question is like I we do

think about like is this an asset that

will get financed in future funding

rounds and if it's not an AI and it's a

traditional enterprise HR company, dude,

I can't get that funded for a good A.

Does that impede your thinking on

whether you'll do the seed? Well, look,

everybody's AI, right? Like, it's almost

like saying that you're not AI today is

like I'm not using the internet, right?

It's like, why wouldn't you use the most

contemporary tools? So, everyone's AI.

You've just got different approaches

where you've got a second time

entrepreneur that goes, I know this

domain really well. I've been uh doing

SAP consulting for, you know, 10 years

or 20 years, SAP, and I've built a

platform, but this part still sucks. And

I was playing around with Claude code.

This is a real situation. I was playing

around with Claude code. My CTO is

playing is is unbelievable. We're now

putting four five together. Will you be

will you be involved? And it's a 20

million cap.

>> Sure.

>> Right. We see lot we see loads of that.

So the the concept of it's only a 20some

you I'm not saying we don't do that. I

mean you know very well we do that all

day long. But we also see other startups

in places that feel off-piece and then

you look at and it's got it's worth tens

of billions of dollars this time.

>> The statement that is said to me more

than ever is price matters less than

ever because the only thing that matters

is in that you're in the true winners of

the day. How do you feel when you hear

that?

>> I mean the the scale of how much you

have to win right is different based on

your price. It's pure math. So uncapped

notes suck at the seed stage. Yeah.

>> I'm not saying we've never written one.

Like unfortunately I've written one and

I'm I think the founders are

exceptional. I think they'll do great.

>> Do you regret it?

>> I don't regret it at all because I love

the relationship. But financially, you

know, will we do as well there? That's

going to be a$1200 [clears throat]

million price when it's when it happens.

Now you in a year in advance and you

take that price from a venture

perspective it doesn't make much sense

>> and access is being sold right the IVs

Stanford's done this forever but MIT and

Harvard doing the same thing it's like

you just want to be there right

sometimes you really have to think that

through and we've said no plenty

>> but we'll probably regret the ones that

we said no to

>> we see YC

really professionalized startup founding

in a way that it turns it into almost a

norm for people leaving some colleges in

particular and some programs at certain

colleges in particular. Do you worry

about how almost easy it is to be a

startup founder today in terms of that

normalization of it and what that means

for what we do?

>> I I do.

>> Yeah.

>> I think there are so many founders,

right? It's like dour. I think there are

fewer entrepreneurs and when the tide

goes out, everybody goes, I knew, I told

you so. and nobody knows when the tide

goes out. But what it takes to be an

entrepreneur is just it's just very

different in terms of fortitude, in

terms of the ability to energize, the

ability to go up that learning curve.

The number of times I've seen the

difference in the trajectory between the

CEO and the CTO. The CTO at some point

up to 50 people, you're golden. And then

at some point you go, actually, we could

bring in better better technical skills.

And if you've got a good co-founding

CTO, that person becomes like a Swiss

army knife and is deployed in different

ways, the CEO goes on this

serious journey, right, where the

learning curve is steep and they've got

to learn to manage and they've got to

learn to put bums on seats. And I think

of people like TJ at Pullpack or Jack at

SeatGeek. And they're changed

individuals. I had uh coffee a week ago.

We had an hour u Mikey Mikey Schulman

from Sunno and I said what are you doing

and he said I'm 30 40% of my time I'm

just recruiting.

I had lunch years ago decades ago with

Jeff Bezos. I was invited to a lunch and

someone smarter than me said what do you

spend your time doing? And he said 50%

of my time is bums on seats. That's

never left me. That's the CEO journey.

That's the entrepreneurs journey. And

there many founders that don't cut that.

>> I think one of the biggest mistakes that

I see investors make though is when they

turn down a company because they don't

like the other co-founder. And the truth

is the other co-founder is most often

not there in 3 years. You don't like

them because you don't think they're

good enough and not as good as the CEO.

Will you invest if you think the CEO is

amazing, but you don't think the CTO is

up to scratch or the head of sales who's

also the co-founder isn't as good? What

are your lessons on that?

>> Rarely. We do that less. And I think

your logic is correct. But so early on,

we're looking for this package. I'm

looking for this CEO CTO kind of magic.

And in some ways, I literally use that

word like I'm looking for the CTO to be

a bit of a magician and the CEO to be a

good salesperson. That's like my

favorite combo. And I agree with you.

the CEO being a good salesperson and

being a real entrepreneur is actually

more important because the CTO role can

be funible depending on how complicated

it is. But I have said no more times

than yes in those situations and I

regret some of them.

But the

the dynamic between th those founders

matters early on. Like to me, I look at

the dynamic and in some ways I think I

want to replicate the partnerships that

I've loved and go I'm looking for some

kind of alchemy here. You don't have to

be identical. You don't have to finish

each other's sentences. In fact, I

prefer that you were different. But how

aligned are you and how much you trust

each other's kind of competence and go

and in a career

I've seen alchemy maybe one hand you

know one like five times four or five

times but when that alchemy happens it's

because of that interplay between those

two people. So I'm watching that pretty

carefully. Has the type of founder that

you like changed especially in the last

few years? I think our team has

definitely oriented much more towards

like deeply engineering specific people

who come out of deep mind who come out

of Gemini or has that changed less than

you'd think h so I would say

the youth the energy the focus the

smarts you put that package together and

it's an intoxicating package

>> I look at experience

and I So what are we going to need to

package with that experience? There are

certain situations SAS and enterprise

SAS certainly looked like that where you

know you learned the lessons you

understood the market you understood

like who the buyers were although that's

very fluid too

>> but did you have the focus and the

energy and I see these 20somes and it's

a psychoraphic in a way so I'm not

saying that I don't want to sound agist

the psychoraphic of that focus and

intensity can last for decades

But there's something about it at that

early stage that is just wow I want to

be part of that and that still turns me

on a lot now the theory of you know the

relationships etc go one more time is

it's great in theory but man you need to

go this journey you need so much energy

when we look at the scaling journey and

we said about kind of how founders have

changed that in terms of what we look

for or not changed for you one thing for

me that's changed and I I get in so much

trouble for this and like VC Brags, this

Twitter account, killed me for it the

other day. Um I very candidly said I

turned down a company the other day that

went from 1 and a half and they were

going to go to five and then they were

going to go from five to 15

and it's just not enough anymore. It's

it's just not interesting. I'm sorry for

venture. We have an opportunity cost of

capital where we can deploy and that's

not fast enough. Has triple triple

double double gone? Is that still a

venture path in today's landscape?

>> 1 and a half to 5 billion to 1 and a

half to 5 million era and then 5 to 15.

>> And so you're looking at this company

going okay you're going to be 1 and a

half to 5 5 to 15 to 30

[sighs and gasps]

David 4 5 years down we might be at 70.

I mean like

is that still a venture pathway?

>> You know

these 10-year funds are taking 18 years.

The one thing you learn is loads of

patience.

There's no to me it's such an

opportunity when people go it has to be

1 and a half to 10 to 15 and then

reality sets in and sometimes it's twice

as expensive and it takes twice as long.

Harry, we still own every last share in

SeatGeek. That was an investment I made

in 2010. It's become it's in the top

three ticketing businesses in the world.

It just takes a really really long time.

some of our greatest companies. They

were showing tremendous promise. But

that one and a half to 10 to 20 like I

just think are they executing and and

and by the other the other side is is

revenue the only metric right sometimes

there is traction on dimensions that the

market is not necessarily recognizing

but you're an insider so so that account

the retention in that account is really

good and that one account's now spending

4x what they spent a year ago and

they're more da and So there's got to be

traction and frankly [clears throat] a

lot of what we do to try tell an

entrepreneurial story to get more

funding is the different dimensions of

traction. But I think this like go go go

overnight or you you're bust. I think

there's a lot of orphans out there for

that. And sometimes, frankly, I look at

like those funding rounds and they're

called seed plus or seed extensions and

I go, that may be the opportune moment.

Like when they're being abandoned and

they can't get the capital because the

bigger funds have moved on, maybe that's

the opportunity. It's not what we really

do,

>> but I can see it as a capital markets

opportunity.

>> Do you remember Bullpen where it was

like their business to do exactly those

rounds? I always thought that was an

interesting business. I don't know how

they've done, but they priced those

rounds. They they priced them for bigger

bigger players.

>> I think the thing is you're so paid for

the risk that you're taking there. I

mean, they really were aggressive in

terms of ownership that you need I think

they did Ipsy which was a big business

and so you have one and it pays for the

rest. Um can when you look at this David

you've been doing this for 18 years and

you hear people like me say oh one to

five like triple triple double double's

dead. Is it really a home run? If it's,

you know, we need a billion dollars in

revenue, Jason Lmin says on our show,

billion valuation.

Come on, that's not venture anymore. Is

this like peak bubble? When you review

the 18-year journey that you've had, the

historical or anacronistic view on this

would be the bubbles get bigger. This is

the wave of our lives. I feel that way

by the way. If I look at, you know,

internet, SAS, mobile, AI, nothing looks

the same. And will there be roadkill

from this wave? Oh my god, there's going

to be a lot. You know, again, you look

at those stats of 500 companies, less

than 100 over 10 billion the last 25

years. How many times, Harry, over the

last 11 years have you heard this is

different? This is different. It doesn't

mean that there aren't survivors and

companies that are going to change the

trajectory of technology forever. And I

think in, you know, open AI and

anthropic and SpaceX, we're seeing that

already. Like these are the metas and

the Googles of our era. Highly likely.

But wow, like it's Hollywood, man.

[laughter] Like 95% are not going to be

there. And it goes back to why is seed

interesting? Like I don't have to be in

the one, right? Like if there were five

companies so of that that are worth $5

trillion literally you go SpaceX I mean

I'm not even including I'm saying like

um with exits so if you look at SpaceX

Tesla Meta that's trillions of dollars

already you take then Nvidia I think

Nvidia started pre25 years ago but even

if you look at the last 25 years ago you

can add Palanteer to that PaloAlto

networks that's about $5 trillion of

market cap

And then the the other 495,

right, at a 2.6 billion average. And

some of those are, you know, we hope

everything looks like Shield AIO. But if

you have 5% of a 500 million, if you

have a 5% of a $2.6 billion outcome,

you've returned your fund. If you have a

$500 million outcome, it's incredible

still. And that's why I think seed isn't

dead. I think seed is crowded and to

some degree very commoditized. I feel

commoditized. I've said this many times.

I feel like brand and in some in some

regard distribution as in your portfolio

and people saying nice things about you

get you to the table.

>> But if it's commoditized, does price not

just become the separator? And if price

is the separator, the mega platforms

win.

>> Well, the problem is the mega platforms

are taking call options. So, is this

good for the mega platforms? Is this

good for the LPs? Or is this good for

the entrepreneurs? Well, probably for

95% of entrepreneurs, it's not good.

Why? You get more I'm I agree with you,

but I'm just playing devil's advocate.

You get more money at a higher price

with mostly a more junior VC who will

let you do your work and not get in the

way. Isn't that what all entrepreneurs

want?

>> I mean, sounds amazing, right?

>> Yeah. The more junior entrepreneur moves

on, right? you're offended and it's like

>> more junior in venture investor you

mean?

>> Yeah.

>> Yeah. Sorry.

>> And the more junior the the principal at

that big fund moves on. They start their

own fund. They move to another fund.

Happens all the time. Right. So the

person who invested doesn't have

mandate. They can't sit around with the

partnership and say look let's just put

another five to 10 like let's turn over

another card because your champion's

gone. By the way I'm being contrarian

here. This does not always happen this

way. I'm just giving you the other side

to this. And then you haven't made the

kind of 1, five, 10, 15 a r, whatever

you want to call it. You just haven't

made that. So it's like you're

overlooked because it's like let's focus

on our real winners and that thing's

worth2 or 3 billion. So 95%

is mandate for further funding is dead

is gone. Now this is the beautiful thing

about most entrepreneurs is they just

don't think about themselves in that

category. I'm the 5%, I'm the 2%, right?

And that's why we love entrepreneurs,

>> but the stats are so far against you. It

goes back to

>> I hate to think of ourselves as like

their insurance policy.

>> But I think a few entrepreneurs have

thought about that. And I think there's

a little bit out in the zeitgeist going

FC is a great insurance policy. You want

them in the round and that it costs very

little to have, you know, Harry or David

in like for 500k or a million. Are you

really not tempted to raise more? Like

every single constrained fund including

benchmark historically the uh central

figure in discipline in venture has

raised a what a billion dollar a billion

and a half growth fund. I was with

another great growth fund that is very

disciplined as well but we're raising

billions too. Everyone who was is like

no we realize the game on the field is

you need money. Are you really not

raising more? It would be disingenuous

to say to you that we don't have the

discussion, that it isn't attention,

that we we go back to it. It's hard to

be contrarian when there's so much money

going around. It's hard to say no.

>> Yeah.

>> And then here's how we come out is the

GP has been the biggest LP and we're

greedy for returns, not management fees.

>> What percent of the fund are you now?

>> We're certainly in the last few funds

the largest LP.

>> Wow. So,

you know, no, there's no LP that is

bigger than the GP. We're seriously

aligned with our LPs, but what are we

seeking? And this is the answer to your

question. It may be wrong, right?

Literally, if you do the analysis, you

may go like that was crazy. You left so

much on the table. We've been very

disciplined about strategy and very

disciplined about DPI. So, but if I just

look at you, I'm sorry. I'm playing

devil's advocate again. I'm just like,

dude, like, you know, you had Coupang,

you had Uber, you had Trade Desk, you've

got Shield, you've got Suno. I mean,

just tack on another $3 to $500 million

vehicle and keep going. I'm sure you

knew Mikey was amazing. I'm sure you

knew TJ was great. I'm sure you knew

that these were great on

Surely that is a conversation that has

rationality

>> because it's a rational conversation. It

comes up.

>> Yeah. And then you come back to saying,

"Okay, who wants to do this?" You round

the you're at an offsite with the

partnership and says, "Who wants to do

this?" And I go, "Oh my, like I love the

early stage, right?" Like I kind of may

do it, right? And and by the way, I am

an opportunist as well. I think of

myself as some kind of value investor.

So the interesting times for that for me

have been like when nobody's funding.

Why? And I think that person's great or

it's a consumer play. So, and I know

consumer multiples are lower, but this

is a internet acquisition

device and these founders are better at

acquisition and the m that's where I

sometimes go. So, it's not in the hype

hype hype go. Like, I'm kind of immune

to that.

I'm in pain. I mean, I I love you so

much cuz you're so much smarter than me,

but I'm just like the market can stay

irrational longer than you can stay

solvent. And when I look at like a Wix

today trading at 2.1 billion on 2.1

billion of revenue, it's a great example

where like there's obvious irrationality

at play, but it doesn't matter. The

market's the market. And if consumer say

is getting the pricing that it's

getting, I can't change that no matter

how good the acquisition machine is. And

so like don't fight the tide that's

against you is my thesis or ethos.

[ __ ] swim in the swim lane that's

swimming in your favor. Am I wrong and

I'm just missing a contrarian beat? No,

there's so many ways to do this.

[laughter] Uh and and people have done

so well. Uh you know there there are big

funds, right, that have returned very

well, right? You've got to be in the

right vintage. But if you look at like

Thrive or A16Z, they've had some big

funds that have returned very very well.

>> Yeah.

>> A little less since 2020. Like if you

look at the DPI analysis, like the

jury's out from 2020 onwards. Now, of

course, if you were in like, you know,

if you're like Josh and you're in SpaceX

and Open AI, that's going to be like the

most ridiculous fund, but wow, you are

in the most rare air. And then there's

just something that's competitive and

unique and and it is economically

irrational potentially but is I was in

that company. I was first. I wrote the

biggest check somehow for me being

competitive with me. Like that is the

biggest thrill. I was with that founder

from the beginning and we literally re

reversed the truck and gave them

everything they wanted. And by the way,

does that mean that we're not writing3

$4 million checks now? We are, right?

Because if you want to get a percentage

ownership in something that you think is

extraordinary, you're writing much

bigger checks than we wrote before. So

the so the the fund is going faster than

it used to. What is your average

ownership now? And has it gone down over

time? I look at ours and our biggest

mistake and I can look at deal 11 Labs.

I can look at Granola.

And StarCloud,

Fractile could have done them all, but

would have had 1 to 2%. And all of them

we turned down purely for ownership. And

that is hundreds and hundreds of

millions of lost returns for ownership.

I've never thought about that.

[laughter]

>> I I I mean, all things being equal,

right, like um I'm not a I'm a

capitalist, right? So, all things being

equal, like I'd love to own more upfront

than less,

>> but it wouldn't be the reason you turned

it down.

>> I've never I've never turned it down.

Never. And you know,

Mikey,

I wanted to give him every last scent,

right? And you reached a point where he

said, "Look, that is the dilution I'm

willing to take. I'm not willing to take

another iota of dilution." And we gave

him what we gave him, which was

literally every single scent in his

first round. We showed it to other

people, by the way. I mean, I showed it

to you.

>> Thanks, David. We weren't going to bring

it home.

>> Um, and then when Matrix led, uh, which

was not, it wasn't a popular round. Lots

of people said no in that round. We

asked every last scent. But would I have

said no to Mikey because of percentage

ownership? Like when you meet the right

people and you're all in, it's like you

get what you get.

>> And so you will do the one to 2%. And

you'll take it even though you can't

size up in next rounds.

>> Well, you know, again, I think pro rata

is almost like the original sin, but if

others have it, like I I don't think

that we should be excluded if others

have that prata. We're seeing rounds now

where there isn't prootera for anyone

but the lead but the most major share.

So it's not a pro rata for all major

shareholders. It's for the lead

shareholder. I'm not sure I agree with

that either in this environment. I kind

of think that there should be a

universal approach to treat your

investors equally but but I think proo

is generally not great for

entrepreneurs. It's a call option

against you. So we feel like we've had

to work every time to put in a bit more

money. We've never ever led another

round. So we have this view of like it

would be negative correlation bias. It

would be unfair to everybody if we

didn't be somewhat kind of uniform. Do

you think it's harder than ever to

accurately concentrate dollars

effectively given the rise of such

preemptive rounds? We've had them where

we haven't even wired the money and

there's a new term sheet

>> at different valuations.

>> Yeah.

>> And that happens quite often now.

>> Is it harder than ever to concentrate

effectively when it's just so fast? some

kind of framework is really really

necessary and I credit my partners over

the years with that of saying we may be

writing bigger checks but above that

post money valuation it's really not our

opportunity anymore and you can look in

the rearview mirror and say man I should

have done Uber I should have done shield

I should have and like huge kudos and

power to the people who did but a

framework lets to act very quickly and I

would say credit to Eric Paley in this

case is he always created some kind of

discipline. So the post money went up

and up and up as rounds and the the

momentum and the size of money and the

environment changed. It didn't we we

would do but we would never lead another

round. We've never done that in our

entire history. So we haven't been

preemptive and we haven't been like

we'll lead your series A and we we like

you more than others. But our ability to

participate has always been there.

Totally get that. Can I ask you? Peter

Teal said before that like if he had

just done every round that anyone else

had done at an up round and it was a

good brand, he would have done much

better was kind of the ethos. Have you

found that to be true

given the era? Like this has been the

golden golden era. It's probably from a

datadriven approach. It's probably true.

Like if we'd followed on in Uber, Kong,

Shield, you name it. If we just followed

on,

>> probably the data would show that we've

done pretty well, right? If we follow,

our view would be we'd had we we would

have had to have followed on in

everything and I think that the absolute

return would be better. I don't think

that the multiple would necessarily be

better on the fund. I'm not being rude.

A framework is not the enemy of this

venture cycle. Like I think it's so easy

to be rigid in your mentality around,

oh, we won't do anything over a billion.

I I get you, but you're going to

absolutely wse at me here. So, are you

ready for a real I think a billion

dollar valuation is the new series. A

>> and you're like, "Wo, Harry. Whoa, whoa,

kiddo. Calm down. Listen to the facts.

We used to do a 50 million post and hope

it would become a billion 20x without

dilution, like blunt." Uh, now you enter

at a billion and you hope it becomes 20.

You know, we have Mccor at 20, we have

Cognition at 26, Cursor gets sold for 60

sold. This is liquid. Well, maybe a

billion is the new series A. No. I think

you may be looking at the top two or 300

companies. Is that not our business?

>> Um, I don't think so.

>> Huh.

>> I think that you I think that that's the

momentum business. And I think knowing

how and when to get out quickly with

some of those really really matters. And

that's not really my business. So my

business is value is getting involved

early and trying to find value

opportunities.

And there are times again where it's an

intoxicating founder and being on that

journey together. But I'm not sure that

those are your fund returners. The

difficulty with some of those momentum

assets is like it was what we were

talking about earlier is you've got to

be able to like run for the exits when

you can on you know it's exactly what

you were saying is

>> you didn't think that founder was all

that great right so when you had the or

or you thought that the like the

valuation was so far ahead of the

reality of the business but you're

asking a question you're asking a a

momentum question.

>> Yeah.

>> Right. And is it all momentum?

I've got to be careful not to be too

anacronistic in this because we have

invested in momentum. There's just no it

would be so disingenuous for me to say

that we haven't like

>> when you say that like what do you mean

we have invested in momentum?

>> Our knee joke tends to be when this has

gotten across a certain point like we're

out of here and credit to Eric at a

point for going like we've captured 80%

of the value. we could capture another

20% if we did Uber at series A or if we

did Sununo at series A. And by the way,

it's not just on paper. I think there

would be buyers for that position. In

hindsight, I look at that and I go like,

were you anacronistic? By the way, we

didn't we didn't even seek to

participate in that round. We kind of go

we built our ownership position and

we're done. Like this is not the kind of

investors we are. We're looking for the

next seed stage round. And I think

Harry, what we've done is we've drunk

the Kool-Aid to such a large extent now.

You and I are so different that you're

going, "This is hot. Let me go go." I'm

going, "I've got a smaller fund. Where

else can I really X my ownership versus,

you know, getting a I know 5x or 10x."

But of course, the environment makes you

look quite silly in retrospect. The

question is how long does this

environment go on for? And it's also

about like how and this is the you you

have unbelievable returns and you've

made a phenomenal amount of money for

your investors but the quantum of cash

that you move matters and Josh and Elad

and the multi-stage funds moving

hundreds of millions and billions.

You you make a larger quantum of cash

and so I get you with the in terms of

your your multiple goes down when you

lead the series A. Look, there's there's

so many different ways to play this. And

I think when you talk about Josh and you

know, a handful, they've killed it.

They've absolutely killed it. A lot of

LPs very wrongly I think don't like the

large platforms and always just come

back to this very kind of I think basic

rudimentary thought that as you scale

fund size, returns always get worse.

Always. You whenever someone says always

be careful. Um but I think with the

outcome expansion that we've seen cursor

at 60 billion trillion dollar companies

in a matter of years with open open air

anthropic you will see venture returns

with mega platform sizes. Do you agree?

>> Largely no. So largely I would say who

are their LPs? Who are they working for?

And in some of these cases, it's not

even endowments anymore,

>> right? Sovereign wealth fund.

>> No, no, it's definitely not

>> and if you and and sovereign wealth

funds and public investment corporations

are looking for IRR,

>> they're not measuring this in how many

times do you X the fund. Doesn't mean

that A6Z and Thrive haven't xed a few of

their funds really, really nicely.

Again, subsequent to 2020, like the TVPI

is there and some in some cases they're

on steroids. The DPI is less there. if

you look at the actual stats, but

they're working for these sovereign

wealth funds and they're giving great

IRRa and some of the endowments, some of

the biggest endowments are like rounding

errors now.

>> Yeah.

>> The the question is who you working for,

right? And like I again obsess with this

alignment with the entrepreneur and like

we're working for ourselves as well,

right? And we're working for DPI and the

bigger we make the fund, the tougher it

is on the DPI. Like what am I doing this

for? fund after fund after fund and you

know I I can't give you the numbers but

fund one fund two by the way there's

this wave AI theme you know if we look

back on fund two it's all about applied

AI I mean that's really what the fund if

you look at the winners in fund two it's

shield AI which by the way in 2016 was

called shield AI it's vicarda right it's

whoop now all of these things are

commoditized all of the hardware is

commoditized. Video cameras are

commoditized. Drones, I mean, you can

buy a drone for, you know, forget DJI,

you can buy a drone for $20 now, like

$50. It's about putting AI around these

completely commoditized platforms. It

was 10 years ago, but it wasn't the

theme. So, the one thing that you're

talking about is momentum around a

theme. And I'm going in 10 years time or

in 5 years time there will be a new

theme. The job will have been to get

into that theme ahead. I don't even know

what it is. I hope I've got some on

goal. And those weren't the expensive

ones though. Those were not they never

are. So using AI is really important. I

guarantee you all of these things are

called applied AI businesses today or

physical AI. physical AI is all the job

is to be in there 5 years or 10 years

ahead and it's not where the momentum

is. It never is. When you look at you

said that kind of fun too and you said a

couple of names there with Vicardas and

your Whoops and your shields. Um how

concentrated are the returns in your

funds? I spent time with Honam from

Altos and he's spoken about return

concentration with Roblox and it was

mindblowing to me. How concentrated are

yours and what lessons do you have from

that? The amazing thing is they've been

way less concentrated than you would

expect.

>> So look at fund two, forget fund one

now. Fund two, Vicarda, Shield, Whoop,

Pillpack in and for the most part one of

or the single largest investor in the

first institutional round. It's not

concentrated.

If you look at fund one, we always talk

about the, you know, the the trade desk

and the Ubers and the Kongs. Fund one

still has Air Table like in at the very

beginning

challenges in the SAS environment, but

Simply Simply is the biggest piano

teaching and and music instrument

teaching company in the world. SeatGeek

haven't sold a single share in SeatGeek.

That's still in fund one. Why haven't

you sold a share in SeatGeek?

I think it's spiritual at this point.

[laughter]

>> It's a religion. I'm wearing Jack's

t-shirt beneath this. Beneath the shirt,

you've got Jack's face, right?

[laughter]

>> That would be an epic.

>> I did that. I did that at my LP meeting.

>> That would be very funny.

>> Before Jack uh Jack and Mikey both

presented and I literally said to them,

"Get me t-shirts." Right. And I ripped

open my shirt.

>> But I I'm actually worried about this,

which is, you know, and I'm not

positioning this at our table at all. I

think how he's wonderful and brilliant

and a brilliant product team, but like

you're seeing the cannibalization

of leaders in a space like Air Table

respectfully and like Sneak the cyber

security company which in a similar vein

is going through challenging times too

in terms of growth rates and everything

involved.

Well, there hasn't been a liquidity

event, but the cannibalization has

already started. It's like the

innovation cycle's taken steroids and

gone too quickly to allow liquidity

events to even happen. Does that worry

you too?

>> Look, I mean, by now, Harry, it's it's

very hard to

play around with Claude or something

like it and not have the revelation that

we've all had. But then you look at some

of these SAS companies and you look at

the SAS apocalypse. When we were when we

were on the OLO board, when it was

listed, we'd look at companies like

Viva, right, which is I think at a $30

billion market cap now. It's come down,

I don't know how, at least 50% or more.

And we'd go, this is the most perfect,

like we want to be this company. It's

hard not to look at some of that market

cap erosion and go, is the baby being

thrown out with the bath water? And it's

about the last 5%. I think it's about

the lost and and I would say if your air

table and viva or olo look very

different the more embedded you are like

the more difficult you are to dispense

because real time thousands billions of

orders are being run in your system or

like missionritical biotech research is

being run in your system the more

embedded you are I think the more

overdone that SAS apocalypse may be the

less embedded clearly right the easier

you are to kind of turf out and play

around with Claude, you name it. But I

think we're underestimating that last

5%. And the contrarian in me, this is

not what what I do, would say, buy a

basket of like the top SAS stocks that

have all lost huge market cap. You're

going to do okay. You you are. And Roy

Driscoll, who we do the show with every

week, has done that. And I put my money

into Palunteer and said, "I'm a momentum

surfer. I did better." [laughter]

>> And that's the hard point, which is the

opportunity cost of cash is so real.

Yeah,

>> that you can be in one and try and be

smart, but you're probably right

longterm or you can just be momentum

trader and you'll be right actually in

the short term and if you can time it

well, it makes a difference. You said

there about

>> the difference between in a way between

our styles is every single company I

invest in and it comes back to

concentration. Every company I invest

in, I invest in with the hope, right,

that it could be another Sunno or Uber.

I literally do. I don't invest in

companies and go, "Oh, I'm investing in

you, Harry, because I think you can be a

10x outcome." I don't I don't do that.

>> You don't?

>> No.

>> Wow.

>> Yes.

>> Every company we're investing and we

think, "Wow, this could be ginormous.

This could be gin."

>> I'll give you Jason Lin. Sorry. And then

do you want He just taught me a very

simple one. He's like, "I'm not smart

enough to predict the future. What I

look for is can I get a 3x on my next

funding round? And if I can get a 3x on

my next funding round and I really

believe in a great entrepreneur, CEO and

a great CTO, I'm in.

>> So, so we we use the same logic, but

it's always been 10x.

>> I will not invest in this if I don't

think if I'm not sure that there's a

10x. We have at our team meeting, I love

it because dot dot dot. If you can't

complete that sentence, you can't

invest. That's how we start the team

meeting. That's how we start talking

about a portfolio company. What's your

greatest lad?

>> Like when you look back on that, what's

your

>> So, so in more recent times, I've gone I

love it because I'm obsessed with Harry,

right? Like I just think that every

question I ask, I get a better answer

than I expected. Every time I press,

there's no there's no evasion of the

facts. He never says to me, "Oh, we're

the only one in this business." He

always says, "It's so much harder than

you think it's going to be. get so much

tougher and like this person's leaving

me and I love it because they're

obsessive. They're all over it. They're,

you know, they're so deep in this and I

just can't get this out of my I I will

not say I love it because of valuation

by the we've we've always come to

valuation lost. We've always gone

opportunity market founders founders

first and foremost. It's in our it's in

our name and we come to valuation lost

and I cannot say that every single time

we've invested we've gone this is a

perfect valuation. In fact

>> rarely is.

>> No it rarely is

a little bit uncomfortable I find.

>> Of course. Of course. Exactly right. By

the way you can go I love it because of

insight into the vertical. I love it

because of an edge that nobody else can

match in a commoditized business. I love

it because, you know, it's a I'm writing

this piece on Nepo babies and I'm going

I love to fund Nepo babies. So

>> what

>> I'm writing this piece right now.

>> Why do you love to [clears throat] nepo

babies?

>> So So I go TJ Parker, right? Working in

his dad's pharmacy when he was 15, 14,

16. like he has got more edge in that

vertical than he knows. Uh Mikey comes

to to AI to voice AI to music to audio,

right? They've come out of Kensho.

That's all they did at Kensho. So you

take Mikey and Georg and um Martin

Kamacho, that's all they did. Martin was

the CTO of Kensho. They're not the Nepo

baby, but Evan at Rebar. So Evan at

Rebar is HVAC preparation and HVAC

quoting. There are over 100,000

mechanical engineers in the US that are

making 100K each at least when they

graduate. And all they're doing is

sitting with this blueprint process so

that they can quote on new commercial

and and Evan's sitting there and by the

way he did work for his uncle's company

that was rolled up in a PE 10 10 of

these things and they said go out and

find the AI for this and Evan goes out

and goes there's no AI for this and he

goes I'm starting rebar and I go there

folks who have been in these verticals

since they were kids. He watched his

uncle in this vertical was like there's

nothing else he was going to do and I go

like they have more edge than they know

what to do with. I get you sorry just to

be clear for you. Neo baby where I'm

from is trust fund baby who has billions

of dollars. I was like dude I do not

want to be funding the kid who's at

Scorpios in Mkos spraying dad's money.

>> I I I I we're we're using Nepo babies

with different definitions.

>> Very different definition. I'm talking

about folks who've been in a vertical.

>> Yeah, I that I

>> have lots of edge in that vertical

>> that I totally get. You said you haven't

sold a share of SeatGeek. The timing of

when you get out matters a lot. Do you

have any lessons on when to get out

given I think this generation of seed

managers will be defined by their

ability to access and navigate secondary

markets effectively.

>> So, it's interesting. You're asking this

at a time where I have never seen

secondary markets as liquid. It's

probably not that surprising given fewer

IPOs, fewer M&A up till the moment here,

an IPO market that will probably be open

for the remainder of this year and then

these IPO markets always close. So in

the top 100 names, wow, the secondary

liquidity is incredible. And you can

price your position, I would say,

reasonably efficiently. You can look at

around and go, okay, the secondary

markets in offering me a 25% discount.

It's probably worth, you know, 7 and a

half, not 10. And then you can look at a

number in the top 50 at least where

you're being offered at least the price

per share of the last round because

loads of folks loads of big folks

Blackstone didn't get their prata and

then they're sucking it up.

>> Mo most I'm seeing do not have a

discount for sure.

>> Yeah. Uh we we we've seen a premium

right where insiders know there's

another round. Talking to your point

about momentum, right? You were talking

about momentum in the early stage. We've

seen situations in our multi-billion

dollar names where the round goes down

in December and the boards already

talking about the March round. And we

kind of see it sometimes when when we're

not on the board, but we just see it in

the momentum in the secondary market.

Now, Harry, you're in very rare air

there. And let me just say, I I don't

want to um in any way make it sound like

we're in that with all of our companies.

We're in that with at any one point a

handful of companies. But in those

situations, I think the difference in

fund management is when you take

secondary and the ability to give DPI

even in your top names sometimes taking

20% off the table if you can return 25%

of the fund particularly if it's a

newish fund. So if it's a you know if

it's 2024 fund and you can give back

25%. Like why wouldn't you do that? and

you're still long. You still own 80% of

that company.

>> I just think we don't think about the

velocity of cash enough. And what I mean

by that is like, you know, yes, there

might be another double, but if I have

to wait 5 years and then the IPO and

then an 18month lockup, Jesus, give me

50% of that now and I'll way rather have

the certainty and the DPI now than the

maybe a double from here with 6 and 1/2

years.

>> Yeah. Do you

>> This is not a precise science.

>> It's not.

>> I've looked back in every direction and

we've [clears throat] gone. By the way,

the best is you sell 20% and you were

wrong. Awesome. Did you do a good job of

sellown on Uber?

>> You know, in retrospect, we probably

sold a little too early. So, this was

early on. You know, this is a business

that's getting close to$10 billion in

valuation, and there's an opportunity to

take some off the table. And you're very

new

>> also at the time that I'm so sorry this

sounds awful and again chastise me 10

billion at that time was so much more

than it is today.

>> Yeah. Yeah.

>> Yeah. Yeah.

>> Did you sell all at 10 billion?

>> No. Definitely not. [snorts]

>> No. No. Uh no. We were we were net long

at the IPO.

One thing that's very sad or challenging

is when when an exit event happens and

then you look at kind of the number that

comes back to you and you're like,

"What? Where did it where did it go?"

And and I think you're having this

normalization of incredible levels of

dilution today more than ever before.

>> Wow.

>> Do you see that and worry about that?

>> Yeah. Look, dilution. It's interesting.

Like I look at uh Whoop versus Sunno

like we're so proud to be in both but

Sunno you know Sununo has been a very

quick journey. So if you look at like

how lower how much lower the dilution is

part of it is just how quick the

momentum of that has been versus a Whoop

which is hardware took a long time like

raised a lot of money along the way like

unbelievably proud of the of this

company. some of these companies. It's

incredible how little dilution there is

because the pre just goes through the

roof. We're seeing also a lot of very

low dilution but large rounds. You're

like ramp raising your like 500 million

at a 40 billion price and actually kind

of seemingly no kind of 50 million

rounds at a billion dollar price. How do

you think about and reflect on those?

Just a brilliant product for founders

that they should absolutely take

advantage of a normalization of

continuous funding because they do more

more frequently. How do you think about

those?

>> And this goes in every single direction

like you've got to be producing and

you've got to get into the rarest of air

there and probably there's a secondary

opportunity in that kind of situation

for us. So we look at that and again

we're in so early that at those kind of

numbers that kind of momentum like we're

trying to sell a little bit of our

position. Do you find LPs have changed?

And what I mean by that is like I speak

to a lot of LPs now. Do you know what

honestly we can say what we want.

They've gone back to wanting t TVPI.

They've gone back to wanting big numbers

and yes they want DPI. Of course they

always want DPI but they are still very

impressed by TVPI and they're very

impressed by oh wow you're in this

glossy name lovable lorum mccor there

still that do you find they've changed

or are they still the same animal

there's lots of change because of who

was doing this 15 years ago and who's

doing it now you have to have some

allocation and the big funds provide

these containers for the large

endowments and the large, you know,

public uh investment corporations, the

if I think of the same LPs that have

been with us for a long time, uh a lot

of them like have minimumsiz checks now.

So, we're too small for quite a few of

them. It's like if I can't put $50

million to and I think there's it just

reflects the inflation of the entire

environment. And there are a bunch that

really do need the TVBI, particularly

the fund of funds, because of who

they're selling to. By the way, we've

seen fund of funds do secondaries of

their entire fund. So, we go, "Oh my

god, you're in fund two or you're in

fund four. Like, you should never sell,

right? Like, this is what's" And it's

like, "It's not about you, right? Like,

you're a rounding error in this fund and

it's got three or four good names." And

I think what they're trying to do is

give liquidity to their LPS for the next

fund. So we've seen when I talk to you

about secondaries, it's in a particular

name. We've seen an entire fund, you

know, billion dollar fund easily just

sell the sell the whole fund or sell a

vertical slice of the fund. What's going

on here is the finance around VC has

become so much more sophisticated. I

don't know if this is good for the

entrepreneurs. It could be because it

just means there's way more liquidity in

every direction. And I think there if

you're a winner, it's it's great because

you can manage the secondary to some

degree. And if you're not on the winning

side in terms of the entire ecosystem,

it can be very tricky. By the way,

Harry, I talked to you about this on

this podcast. we spend other than

thinking about some secondary in our

very mature portfolio. I spend very

little time on this. The beauty of this

is I am not a financial animal, right?

Ultimately like I'm much more of a

entrepreneurial curious animal, right?

Like I'm looking again for these these

wizards, right? Like these I don't know

these like you know wayfinders. I'm

looking again and this is the problem

for me in a way is I'm or the blessing

is I'm looking to repeat a success. I'm

looking for the next high. I'm looking

for a Noah gloss. I'm looking for

someone who is that focused on and has a

vision and will not take no for an

answer. That's how I'm spending 90% of

my time. I'm not spending much time even

on LP management.

>> Do you think we have less loyalty than

ever? You said focus there on the

founder side. You see founders have

angel investment portfolios that are as

big as our fund portfolios. You have

them doing side funds. You have them

doing two companies at once.

You have them leaving very quickly often

in 6 12 18 months. Is there less focus

loyalty than ever?

>> Uh we've definitely seen evidence of

that. We've also seen people who stick

it out way beyond what is rational just

because they're obsessed. So I think on

the margin you see some of these actors

you see and we've seen founders

so-called founders

and they were like

kind of the founder but they got a CEO

involved and then they became exec

chairman and they used their brand power

and I think like shame on us for and we

did get involved in some of these

situations where we were dazzled and it

was like you know second time around. Is

that person going to stick around? And

some of it is just didn't get big enough

fast enough.

>> So, there's some abandonment.

I still see that the vast minority of

the time.

>> Like, I think it's easy to extrapolate

and go that's a trend. And I could be

very polyianish about this, but for the

most part, like I see founders wanting

to make it work. second time founders is

a little bit embedded in that question

and the question is if you've done

really well what does it take to move

the needle and I think overall we've

done a little better on second time

founders who didn't do that great up

front they didn't they did okay right

it's life-changing like the first

million dollars is so life-changing

but they're really hungry they've

learned some lessons they've got one or

two people that will join them on on the

next journey. They've learned some

lessons and they are hungry. They're in

a they're in a hurry as well. We've done

better there than generally with folks

who had great outcomes and kind of said

let's go again because those are the

folks who got bored and went like m not

big enough, not fast enough. What What

does no one know? You've been very

successful. What does no one know about

making money that you wish you had been

told earlier?

So, like one weird one for me is like

far more successful than me, but like

I'm much less patient now than I was. I

got used to a higher standard of

service, food, quality of everything.

When something's bad now, it frustrates

me a lot more than it did when I didn't

get used to it.

I don't like that in myself, actually.

I'm less patient. I I I

patience is probably my biggest vice.

lack of patience. If you asked people

about me, I'd say they they generally

say he's great, he's kind, and he's he

lacks patience. I'd say my kids say that

of me. I think it's the ying and the

yang. I think it comes with

entrepreneurship to some degree when

you're that immersed in this

environment. I think you kind of can get

fed up quite quickly.

the the more virtuous answer to you,

which I prefer, is you kind of start to

go, the stuff that really matters is

kindness and how we interact with each

other and how I left you, how you made

me feel, and all the rest is fluff. At

some level or another, we're like our

phones have become these remote controls

for our lives. actually the entry price

to like get what you want when you want.

If you want a vehicle there, if you want

your food there, if you want to book a

flight or a train ride. Earlier last

week, uh the plane is delayed literally

on the Amtrak app. 2 seconds later, ask

the Uber to go to Amtrak, go to Penn

Station instead. Like the degree to

which we can get what we want when we

want at any level. you don't have to be

that wealthy to get it is insane. Right?

So, what's happened is our level of

expectations have just gone up through

the roof. I don't think that's just

about you and me. I think that that's

the perennial equation of like

satisfaction equals perception minus

expectation. So, it's just much easier

to not be satisfied anymore because our

expectations are so high. So our

perception, you know, it's one thing

when you go into a fivestar hotel, you

have this huge expectation. You walk

into a three-star hotel, you have a much

lower expectation. Well, extrapolate

that equation for life now. So it's easy

to get pissed off. And the antidote to

that is stopping for a second and

saying, "How will Harry feel when I left

him today?" like did he feel like I gave

him a real hug and I was kind? And I

think that's going on in my 50s now is

how do I leave people? How do I leave

the world? How do I leave the

entrepreneur? Was it like we squabbled

over the last, you know, percentage

point or it's like just this journey's

been awesome? I always think there's

energy drains and energy gains and how

you leave someone is how you're

remembered. Um going just going back

before we do a quick fight I do have to

ask how does this landscape change with

open AI and anthropic they are so

seismic in terms of just sheer size both

will be trillion dollar plus potentially

close to two trillion how does that

change the landscape do you think for

the better I remember the Microsoft

Google case going on forever and Gates

going you know we are disruptible and at

the time going like who could disrupt

Microsoft and turns out you know Google

was Google and then you go who can

possibly disrupt Google and then you

look at OpenAI and Anthropic and you go

wow like if if nothing else and there's

so much else like if you look at the top

of the funnel in terms of where you

start your search when did you last

start a search on Google right like it's

just mind-blowing that displacement and

the good news in this environment and

this ecosystem is that they will too be

displaced and so the platform has

changed tremendously. Are they going to

be disrupted?

>> No, I don't. I think Google's a net

winner. I think uh I actually think

Google's done.

So I think Microsoft have done a crappy

job of um AI generally like I think

Google's Google is actually if anything

in pole position because they come from

that environment and the ability to

search with context the apply with

context

>> is just like incredible but they're

having to fight like crazy for it.

Microsoft, it's not clear to me that

they can get back because their AI feels

second rate compared to the top three or

four. But I think so there's a platform

change. There's always been a platform.

You could argue that radio, television,

internet was a platform. Can you do well

in that platform? Oh, hell yes. Do you

think they will lead to a ton more

venture money coming in with a huge

amount of money going back to LPS from

the returns that are generated? They'll

plow those back into venture. So, the

returns at the top are going to be

incredible. They have to be now. And I

think that that capital is going to

spill over into venture and all sorts of

investing. You alluded to it earlier,

Angel. I think luxury, right? Like I

think if you own a luxury property, uh I

think

>> San Francisco property prices,

>> oh my god, like San Francisco's Rome. I

was there like 6 weeks ago like San

Francisco and the Bay Area is like and

it's more San Francisco than the Bay

Area is back on steroids, right? It's

like going to Rome, right? You know,

when people write off the United States,

which is to me still the greatest

country in the world for venture

capital, I go like, "When were you last

in San Francisco or the Bay Area?"

because it is insane at the moment.

What's going to happen is there's always

boom and bust. So, you know, a lot's

going to come out of the system at some

point. Are we headed for another dot

crash? Definitely. If like is not a

question when, nobody knows, right? But

is there a lot of capital, a lot of gain

coming out of the system and that will

be in reinvested in venture and it may

not be in classic kind of structural

venture. It may just be in like angels

putting money all over the place and

some of those angels are going to know

people that worked with them or for them

and they're going to, you know, I think

you can bypass traditional venture to a

great extent and that's the challenge

for us. That's the challenge of how do

you stay relevant in this environment

when there are so many alternatives.

>> I completely agree with you. Final one

before we do a quick fire. Do you buy

the commonly stated concern about

smaller teams, job displacement, and a

concerning future for human

participation in labor forces? Underpins

to endeavor are getting better and

better and better. Like I remember, you

know, when we went from servers to cloud

and that was like, wow, like I get all

of this for free, right? Like I don't

have to do any of that, right? Like

security and servers and like forget

that I just do cloud, right? If you look

at like where AI and where this

foundational platform layer kicks you

off, it is incredible what you can do

with very few people. And we are looking

at certainly sub 10 people. Companies

achieve a lot. Do I think that we're

going to have mass unemployment because

of AI? And you're seeing a lot of

leadership now agree with the viewers.

No. I think we're going to see

tremendous productivity gains. I think

like every wave there the halves and the

have nots and if you're not training and

playing it's a little bit why youth has

an advantage because out of college and

that if you're tinkering and playing

right like you are familiar with the

tools you can use the tools and it used

to be the halves and the have nots were

like have data I talked about this with

Noah Glass and Olo all day long going

like the value of having data and using

that data and by the way it's yours to

lose if you don't enrich that data. Now,

the value of having these tools, it's

becoming more and more binary, but I do

believe you'll see swaths of people

retrained on this. And I I think you're

seeing it globally. I think you're

seeing this as a opportunity in lowcost

environments in places that are not

Europe, not the US, not the north where

you can skill people up and you can

provide these skills to the rest of the

world at tremendous cost advantage. My

worry is it's much easier to train than

it is retrain. And actually the

22-year-olds coming out of university

who are tinkering in dorm rooms with

Claude and kind of they're not super AI

pill, but that they're mentally plastic

to it and they they're going to be

pretty good versus Simon or CLA who are

45. They've always done their job in

accounting and they just are not so

mentally plastic.

>> So the only advantage that Simon and Cla

have is they are very vertically

knowledgeable and relevant. So sometimes

in terms of sales, like if you're

selling to yourself, there'll actually

be very good salespeople. This is a

theme that I'm kind of interested in

services business where you won't buy

that from you. You you you want to see

your auditor at some point. You're

prepared to say I know AI will do an

amazing job, but at some point you want

me to come see you and just kind of like

go, you know, I I haven't like left this

whole thing to AI, right? Like I

actually know what I'm doing. So I think

there will be people who are vertically

relevant who be able to sell and there

are many industries where the

relationship still matters. At a certain

point if you've got litigation and $100

million you can get AI to write that

little contract for you where it's

$1,000 on the line but you've got a $100

million litigation you want to look at

me and say like Dave your 10 years of

experience I need it right now. So I

think there are times where knowing a

vertical being relevant in that place

and in the service industries I think

it's good for the UK by the way. I think

there'll be a ton of people who are

still needed for the human interface

that's not going away. I think that a

lot of the work that was grunt work and

human work behind it going away. On the

services side, I think it's just a TAM

expansion play, which is like so much of

the things that you couldn't afford a

lawyer for, you'll use and you'll get

great benefits from. And that is just a

TAM expansion play. I think insurance,

lots of admin, like lots of like life

insurance. I want to there's been a lot

of direct life insurance sales anyway.

Like I But but I think that in bigger

ticket items, having a human who gets it

as the interface, there's still place

for that. Totally agree with that. Um

there was something interesting. I had

this incredible founder June who's the

founder of a company called Similey

which does simulation markets and he was

like we will have companies spend 100 to

200 million on one

uh model kind of result because that

model result is so important like the

output of one query and I was like wow

that's a really interesting world where

you will spend 100 million on anthropic

telling you the answer to one question.

Nuts. What's the size of that

organization that would spend that kind

of money?

>> Oh, [snorts] PNG, uh, Coca-Cola, Nvidia,

uh, Visa, you name it.

>> You know, is it worth us sponsoring the

World Cup for a 10-year exclusivity

period? Visa,

>> right?

>> I think that, uh, governments and

defense organizations,

some kind of speculation with data of

the future. I think that's a very

interesting play. Do you worry that

Trump's been good for business but bad

for everything else? Is that a hard

balance to hold in your head? I ask an

outsider. Genuinely curious. I think you

have to hold many truths at one point in

time and

there's the the question is did Trump

create this environment or is he

presiding over this environment and

getting credit for it. I think with all

presidents they arrive and they get

credit for the environment as it is and

yet it was created many years ago. Uh

and letting AI thrive in the US has

generally been a good thing for the tech

industry in the US. The level

[clears throat] or lack of safeguards on

that could well be problematic. But net

net like if it's good for business, it's

good for the US. I think Rusefeld said

that. I think that's what these

administrations

have said. And by the way, I think that

a lot of the tech backlash

around Biden was for this reason.

Whether it was true or not, a lot of

insiders say to me it was BS, right?

That like for the most part Biden was

super pro business. And if you look at

the subsidies for energy, if you look at

a Tesla today, this is the thing that

kind of I don't really get about Elon is

is the num the the the non-dilutive

government funding that Musk got for

Tesla from the Biden administration was

huge. So without being political, I

think that net net like government in

the US has been pro business for a long

time and I think that the country is

really reaping the rewards of that.

There are two AI superpowers in the

world. By the way, what's so fascinating

is in the 1820s, China was the economic

superpower of the world. I don't know if

you knew that.

>> No, I didn't.

>> Yeah. So Great Britain displaced China.

And a lot of it was industrial

revolution and then the US displaced

Great Britain. There was in the

economist there was a chart on this but

in the 1820s 25% of the world's global

output economic output was from China.

It was the biggest economic machine in

the world. And really what you're seeing

is two superpowers emerge for sure. And

I think a lot of this is going to be

about AI. AI flows into not just

industry, but in terms of what's going

on in defense, having been very very

early the first check in shield AI and

watching how that's played out. The US

needs it. Like our our enemies have

access to all of that on steroids. I I'm

terrified about China right now to be

honest. when you look at the power and

strength of their open models,

but that goes back to thinking about

Microsoft and Google being disrupted.

What could possibly you know that

anthropic and open AI are going to be

disrupted? It's like unequivocal like

our whole careers are about disruption.

Those platforms never ever stay forever.

Where is it going to come from?

Excellent chance it comes from China.

It's coming

>> 100%. God, we haven't have enough time

to for them to establish their

incumbency yet before they're already

being taken down by Chinese open source

models. It goes to the point on the

speed of innovation cycles.

>> Yeah. Yeah. By the way, we haven't even

touched on underlying computing. So, if

you look at photonic computing, if you

look at what's coming down the line now,

so you looked at Intel at a point when

like that that can never be disrupted

and then Nvidia, it's just like

mind-blowing. What's coming to get

Nvidia? like the photonic computing

plays right now where it's not

electrical anymore, it's photons. So if

you look at the data centers where

everything that can be optic fiber now

is so every single connectivity piece of

hardware is fiber. The only thing that

has not been nailed is the chip, right?

You're going to see optic chips with

which are very very energy compliant. So

when people talk about the data centers

and the energy sucks that's going to

change in my view if you say in 10 years

time and I am not a thematic investor

but I am such a deep believer in the

status quo being changed always and not

and like nothing stays the same. I think

photonic computing is coming down the

line and I think that's going to be the

Nvidia disruptor or Nvidia is going to

buy those companies.

>> Okay. And the capital intensity required

to build a photon company I think or an

energy company as we're in some is just

dramatically more capital intense than

prior technology. Again going back to my

point you need more money. This is where

the US could be deficient. If you look

at the amount of money that's being

spent in China on energy efficiency and

energy research now I don't think we're

spending enough. And by the negative of

the Trump administration is we need much

more money being spent on R&D. And I

think there was a view that the

universities are squandering it to a

large extent. I agree with that. But I

think that we tapped off a lot of DARPA

R&D

that goes in that finds its way into

every nook and cranny of of um of the

economy and we need more of that R&D. We

see some of it. I live in Cambridge,

Massachusetts. We we have some of the

best R&D organizations on the planet. If

you look at MIT, Harvard, Northeastern,

BEu, BC, what's going on there? And

cutting that spend, which goes back into

society, I think is problematic.

>> Totally get that. Another one though

that is more challenging, I think, to

change is just policy and regulation.

Like Chinese approach to policy and

regulation is is almost none.

>> It's none.

>> And it means that you can bluntly build

and deploy so much faster.

>> And Europe's the worst. US is

>> tough, too. I'm not in biotech, but when

I talk to friends who are in biotech

venture investing, they're all flying to

China all the time because they're

going, "Look, in terms of R&D, in terms

of licensing, in terms of anything goes,

and in fairness, it's not a totally

anything goes environment, but there's

so much more grassroots activity and a

lot of it has to do with regulatory

environment."

>> Totally get that.

What would cause you final one, what

would cause you to increase fund size?

>> Anything. Oh, I would say um so if you

if if I am honest about what we did

early on is as an angel I had said the

risk premium for the seed stage was way

overstated.

So the premium for experience right like

I couldn't get that. A lot of the folks

that I got involved with very early were

graduating.

There were Noah Glass, Jack, uh you name

it, Eric and Micah. And the there was a

dislocation

between the perception of value later

versus earlier and that has been largely

narrowed and crowded out. So if there

was some kind of Harry, we didn't come

at this going I'm obsessed with economic

arbitrage. We came at this going, I'm

obsessed with great founders and I want

to vicariously be on that journey. But

if you had to look at this

retrospectively and say, what did we do

in economic terms? There was an

arbitrage. There was a real arbitrage

because the risk premium at the seed

stage was way overstated. That has

changed completely. What would cause me

to raise a bigger fund? If I looked at

series A or series B or series C and

went like there is such a value

opportunity because everybody's

abandoning this. I don't think it's true

at the moment. I think just capital and

money finds its way to everything. But

if you went so many series A companies

are orphaned and there's amazing value.

There hasn't been one to 10 to 20 an ARR

increase in one year but wow they're on

track and that looks like it smells like

Olo. It looks like SeatGeek. I think

that would cause me to say we should be

investing $10 million at that stage. So

it's not momentum, it's a sense of wow

like I can't believe that others and I

have been very tempted there. I've been

very tempted to say this company is

doing incredibly well on the revenue

side and it's being undervalued. Final

final one on principle you say about

Olan. I love I think Noah is one of the

great awesome human dude. It's 17-ear

journey to a 1.6 1.7 billion exit.

>> 2 billion exit.

>> 2 billion exit. I love Noah. I love Ola.

It's an amazing business. It's an

amazing journey. But when you think

about like utilization of cash most

optimally, 17 or 18 years at $2 billion

exit, the IRRa is not amazing. How do

you reflect on that and and justify that

versus maybe hotter rounds?

Yeah, I mean the outcome was it's

publicly known eventually Toma Bravo we

took the company private for about a $2

billion valuation. So not a not bad for

a few years of work and if you take on

an IR basis you're probably right. The

journey and the fun of it was just

enormous. So being involved with Noah

where it was Noah, a few other founders

and me from the beginning and being on

the board until that sale was just the

ride of a lifetime. So first I what have

you changed your mind on in the last 12

months? What's been surprising and what

I've changed my mind on a little is is

like where is where AI should have

impacted like crazy and I've seen lesser

impact so far with all the hype with all

the momentum like AI changes so much in

terms of software and enterprise and SMB

other than the models themselves and

some good stuff around human interface

so a lot of stuff around the voice has

gotten a lot better. I don't know about

you, but I would have expected much more

around consumer AI. So, I've seen Sunno,

I've seen but like in terms of changing

how I do stuff, I I type much less,

right? Like I speak much more in terms

of communication. Like I would say there

are so many kind of consumer areas that

I feel are not yet played out at all.

When you're doing Sunno at 5 billion,

what are you underwriting it to? I think

that the folks investing at that level

are going this is a Spotify disruptor

that this is that Spotify and Apple

Music. It's a big bet that

>> you got to go from creation tool to

consumption tool.

>> Oh totally totally. Uh that's why Jack

from Snap was brought in is

interestingly I was at a conference with

Martin and Martin was on a Martin

Kamacho who's the CTO of Sunno and the

panel he was asked a question if a large

language model could do what you do

better than you do it like would you

slot that in and you're talking to the

CTO the guy who's built the the whole

model the entire Puno model is from the

ground up and without missing a beat

Martin goes wouldn't think twice about

it. It goes to your point of this is a

consumer product. The experience, the

interface, think Spotify, right? That's

what we offer, right? How we get there

is obfuscated from the user. The user

couldn't care less. Like whatever gets

you there. Did you ever predict the

speed of that?

>> I mean, no.

>> Yeah.

>> No, definitely not. Because I do you

remember the days when Slack 1 to 10 in

18 months was like the gold standard. I

mean so you know multiple hundreds of

million. I mean half a billion or

whatever it is now. It's nuts.

>> No. No. Goes back to Uber. You know when

Eric's asked how did you know? How did

you know? And Eric goes I didn't. He

said the company I saw before the

company I said saw afterwards. Like we

underwrote those in the exact same way.

And I think when you go anyone in my

seat who says I knew is just full of

[ __ ] [laughter]

[gasps] I I absolutely love that. What's

been the most controversial deal that

you've done internally?

>> What can become controversial is the

what or the where. So certainly Kong was

like got back I said to Eric Korea and

he said you know do you even know if

it's north or south? But the magic there

is I am based in Harvard Square. So

people go, how do you get to Korea,

right? Like how do you get to all sorts

of places? And the answer is Harvard

Square. So Bomb, you know, Bomb drops

out of HBS after his first year and

comes to see me. And another

controversial company was probably

Shield in terms of the what it does. So

I would say the whole partnership didn't

necessarily love, you know, defense

drones. And early on it was like, is

this only defense? So I love it because

has certainly taken us to some very

controversial geos and controversial

watts.

>> Our prediction marketplace is just

legitimized gambling. It has to be right

like it it I mean if you look at like

Kelsey and Poly market what's the

difference there between DraftKings and

Bway and they seem very similar to me.

But by the way this will be

controversial. TVPI verse DPI. The one

looks like a prediction market, right?

And the one's real. Like I I could say

the same, you know, TVPI looks like a

prediction market, right? But I mean,

candidly, when they're doing two billion

in AR, who gives a [ __ ]

>> The one thing that you worry about is a

Trump change in administration and what

that does to regulation around them.

>> Yeah,

>> that's a different game.

>> What do you know now that you wish you'd

known when you started Founder

Collective?

>> So, for the most part, frameworks have

saved us. It's also the place where if I

look at some of the deals that we didn't

do and we just went we used valuation as

shorthand to say no terrible mistakes.

So Clavio

loved Andrew loved Ed came to me first

came through Hugo Funfiran who also sent

us and

didn't do it because of the framework

and the framework allowed me to easily

say no. So we'll miss a lot. We'll make

plenty of mistakes. I think I've freed

myself like you a little more in that

area and just go they're extraordinary.

But the frameworks have saved us as

well.

>> Penultimate one

biggest advice on a happy marriage and

relationship kindness and being present

being present with each other. And I

think like I think of this at dinner at

dinner time no phones are allowed

anywhere near the dining room table. And

I don't take my phone to my bedroom.

Like my phone is never alongside my bed.

Here's the rub. Doesn't I don't need my

phone to be distracted. Like here

distracts me perfectly. How to be

present and involved and look you in the

eye and kind of make you feel with my

body language that I'm hearing you, that

I'm invested in you. I think the same

thing that we think of in founders like

happy life your kids your wife your

siblings your parents like how this is

the lifelong goal like I don't I have

not got this nailed but how do you show

them you're present you're there like

they matter to you and that's that's the

quest final one what are you most

excited for in the next 10 years you

know I I look at like me you know my

mother and I walk marathons uh she's got

our math

Um, I think there'll be amazing

discoveries for chronic conditions which

we always just assumed would be forever

and that could change millions of lives.

I think that's super exciting. What

[snorts] are you most excited for? I

mean, you're leading the witness in a

few ways here, but I would say that each

wave brings things that we couldn't

imagine. And I look back to driverless

cars and there was a promise that that

was like 5 years away. And it turns out

like 20 years from now, I saw Whimo

driving around London. I think it's

coming here soon. We're not quite there.

And yet we're back in the it's slow,

slow, slow, and then it feels like

overnight. And of course, if you were

involved, if you're involved, and this

is again the intoxicating part of what

we do is, you know, before the world

knows or the world cares, but you know

that it took a long time. And yet I

think we're on the threshold of a lot of

really interesting stuff. Like I think

that you and I could be buying the very

last drive driven cars. Like I think

that in 5 to 10 years time like our kids

will not need to drive. And I think with

AI we're on the threshold of a lot of

that and there's a lot of doomsaying

there always is but in terms of

discovery in terms of what we know about

the world in terms of health right in

terms of you know you look at chemo and

the number of friends of mine who have

been treated or have passed away and you

look at chemo and you go that is like

prehistoric and I think that we are with

AI with the amount of compute going on

in healthcare and other realms like

there are solutions coming through, not

fast enough, but I think it's it it's so

exciting what we're involved in.

>> It's very exciting for me too to hear

you say that because I don't actually

have a driver's license and so you could

uh assuade me or relieve that necessity.

David, thank you so

>> you live in the most walkable the mo in

summer the most walkable wonderful city.

You don't need a driver's

>> Oh my god, dude. I never ever need to

drive. Um thank you so much for doing

this. Thank you so much for 11 years of

friendship. Honestly, it means so much

to me and you've always been so kind to

me.

>> Harry, you've gone from strength to

strength and that's my wish for you is

keep going from strength to strength.

You've been a great great voice in this

environment, a great voice in the world.

>> Thank you so much.

>> Thank you.